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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Reliefs and exemptions: Overlap relief

Under FA03/SCH17A/PARA9, relief from stamp duty land tax (SDLT) is available where:

* one lease (or notional lease) is replaced or followed by another
* of (substantially) the same premises, and
* the respective lease periods (or notional periods for SDLT) overlap, so that
* rent for the overlap period would otherwise be subject to a double charge to SDLT.

An example of such circumstances include where:

* a lease is surrendered (or treated as surrendered) and, as consideration for the surrender, a new lease is granted for the same or substantially the same premises

For the purposes of calculating the net present value (NPV) of rents under the new lease, any rent payable under the new lease for any period falling within the overlap period is reduced by the rent which would have been payable (and has been taken into account for SDLT purposes) for the overlap period.

The overlap period is the period common to the terms of both the new and old lease. It is the period from the date that the new lease is granted to the date that the old lease would have ended (for SDLT purposes) had it not been terminated. This includes extensions to lease terms under FA03/SCH17A/PARA3 and FA03/SCH17A/PARA4 (see SDLTM18725 and SDLTM18730).

The rent which would have been payable under the old lease is that which was taken into account in calculating NPV for the SDLT charge on the acquisition of the old lease. See SDLTM18460.

Further guidance on “rent taken into account” on completion following substantial performance can be found at SDLTM19311.

Overlap relief cannot reduce the rent payable under the new lease to a negative amount. In other words, the amount of rent to be used in the NPV calculation for any year cannot be less than nil.

Note that:

* Overlap relief is only available where the old lease was subject to SDLT. Where the old lease was subject to stamp duty, all rent payable under the new lease should be included in the NPV calculation for the new lease, irrespective of any overlap period, because no rent has been taken into account for SDLT purposes.
* No overlap relief is available where a lease on which an SDLT exemption has been claimed is subsequently surrendered and replaced by a new lease which does not meet the conditions for relief. No rent was taken into account in determining the amount of tax due on the first lease so there can be no entitlement to this relief.
* Where the rent is variable and the provisions at FA03/SCH17A/PARA7 determine the ‘highest rent’ (see [SDLTM18530](, overlap relief is disregarded and the ‘highest rent’ is the rent determined before any reduction for overlap relief.

Relief is available in the same way where a renewal lease is backdated, as follows:


* a lease (‘the old lease’) was chargeable to SDLT and
* the tenant remains in occupation past the termination date,

then the period of tacit relocation is initially treated as an extension of the original lease by one year and additional SDLT may be due.

If then a new lease is:

* granted on or after 19 July 2006
* for (substantially) the same premises as the old lease, and
* expressed to begin on or immediately after the end date of the old lease (‘backdated’)

then for SDLT purposes:

* the term of the new lease is treated as beginning on or immediately after the end date of the old lease, and
* relief is available as outlined above for any rent payable in respect of the period between the termination date and the actual date of grant of the new lease. See [SDLTM18750](

See also the examples at SDLTM19315 - SDLTM19335.