Leases granted for a fixed term ‘and thereafter until
determined’ or for a fixed term that may continue beyond the
fixed term ‘by operation of law’ are treated for stamp
duty land tax (SDLT) purposes as being for the fixed term stated on
grant. Such leases include business tenancies within Part II of the
Landlord and Tenant Act 1954 (‘LTA’54) which normally
continue beyond the contractual term until they are terminated or a
new tenancy is granted.
A lease will not automatically continue beyond its contractual term if, for example, a business tenancy is contracted out of ‘LTA‘54 or a business tenant loses the right to renew the lease. In many cases, a tenant remaining in occupation at the end of the contractual term of such a lease may be trespassing, or there may be a tenancy at will or a contractual licence. None of these cases has any implication for SDLT.
However there are SDLT implications in cases where the lease is treated in law as continuing beyond its contractual term and rent remains payable, for example:
Under FA03/SCH17A/PARA3, these leases are treated for SDLT
purposes as being for one year longer than the original term,
irrespective of any other rule or operation of law which determines
that they should be extended for a longer or shorter period.
Where the increased net present value of the extended lease gives rise to a charge or additional charge to SDLT, a return or further return is required This should be submitted by letter to The Compliance Team, Birmingham Stamp Office within 30 days of the day after expiry of the previous lease (but refer to note below re: pre-01/12/2003 leases).
If the lease continues after this one year extension, it is treated as being extended by another year and so on until either a new lease is granted or the lease is determined. In these cases, if a return or further return is required it should be submitted by letter to The Compliance Team, Birmingham Stamp Office within 30 days of the day after expiry of the previous lease (that is 1 year, 2 years etc. after the end of the contractual term of the original lease).
Where a charge or additional charge to SDLT would arise merely because of the extended term of a lease under this legislation, it does not apply to leases granted before 1 December 2003 which were taxable under stamp duty.