A business lease in England and Wales normally continues
after the end of its contractual term by operation of law until
terminated by notice, unless the parties contract out of Part II of
the Landlord and Tenant Act 1954.
For stamp duty land tax (SDLT) purposes, this period of
remaining in occupation or ‘holding over’ is initially
treated as an extension of the original lease by one year.
Generally, any continuation of occupation after the express term of
the lease has finished is dealt with similarly.
Where the original lease was granted before 1 December 2003 and
was taxable under stamp duty, although the lease is treated as
being extended, there are no further stamp duty or SDLT
implications solely because the term of the lease has been extended
after implementation of SDLT.
There may, however, be SDLT consequences if other variations
occur, for example in the amount of rent charged. Refer to
SDLTM15000.
Where the original lease was granted on or after 1 December 2003
and was taxable under SDLT rules, the extended lease is also
taxable under these rules.
This may make a difference to the tax payable on the rental
amount as the net present value of the rent will be increased by
the additional year’s rent. Where there is such a tax
difference, this should be notified to HM Revenue & Customs, by
way of letter to
The
Compliance Team, Birmingham Stamp Office, giving sufficient
information to identify the original return, land, parties to the
transaction and the additional tax due and how it has been
calculated. Where the period of holding over extends into a second
or subsequent year, the same calculation should be made and
notification given each year there is more tax due. Notification of
these holding over periods is only required when more tax is due.
Refer to
SDLTM14060 for more information about
treatment of such leases.
