Guide to Overlap Relief for Stamp Duty Land Tax on Leases

SDLT overlap relief on replacement or renewed leases

SDLT overlap relief helps prevent rent being taxed twice when a new lease replaces or follows an old lease for the same, or substantially the same, premises and the two lease periods overlap for SDLT purposes. The relief works by reducing the rent used in the new lease’s SDLT calculation for the overlap period, but only where that rent was already taken into account for SDLT on the old lease.

• It applies where an old lease or notional lease is replaced, renewed or treated as surrendered and re-granted, and the premises are the same or substantially the same.
• The overlap period usually runs from the grant of the new lease to the date the old lease would have ended for SDLT purposes if it had continued.
• The reduction for the new lease is limited to rent already counted for SDLT on the old lease for the same period, and it cannot reduce any year’s rent below nil.
• Relief is not available if the old lease was under the old stamp duty regime, or if the old lease was exempt so that no rent was brought into the SDLT calculation.
• It can also matter in holdover cases and where a variation amounts to a surrender and re-grant, but the exact result depends on the facts and the statutory rules in Schedule 17A paragraph 9 Finance Act 2003.

Scroll down for the full analysis.

SDLT overlap relief for leases: avoiding a double charge on overlapping rent

This page explains when SDLT overlap relief can reduce the rent taken into account on a new lease. The relief matters where an old lease and a new lease cover the same, or substantially the same, premises for an overlapping period. Without the relief, the rent for that overlap period could be taxed twice in the SDLT rent calculation.

What this rule is about

SDLT on leases can be charged by reference to the net present value of the rent payable over the term. A problem can arise if an existing lease is replaced, renewed, or treated as ending and being re-granted, but the old lease term and the new lease term overlap for SDLT purposes. In that situation, some of the same period of occupation may already have been taken into account when SDLT was worked out on the old lease.

Schedule 17A paragraph 9 Finance Act 2003 deals with that problem. It allows the rent under the new lease to be reduced for the overlap period, so that the same rent period is not counted twice for SDLT.

What the official source says

HMRC says overlap relief is available where:

• one lease, or notional lease, is replaced by or followed by another,
• the leases are of the same or substantially the same premises, and
• their lease periods overlap, so rent for the overlap period would otherwise suffer a double SDLT charge.

The manual gives common examples:

• an old lease is surrendered, or treated as surrendered, and a new lease is granted as consideration for that surrender;
• a business tenancy protected by the Landlord and Tenant Act 1954, or the equivalent Northern Ireland legislation, is renewed;
• a variation of a lease is so significant that it amounts to a surrender and re-grant, for example where extra floors are added to the demise.

For the new lease, the rent used in the NPV calculation is reduced for any part of the new lease that falls within the overlap period. The reduction is by the rent that would have been payable under the old lease for that same overlap period, but only to the extent that rent was already taken into account for SDLT on the old lease.

The overlap period runs from the date the new lease is granted to the date the old lease would have ended for SDLT purposes if it had not been terminated. HMRC says this includes certain statutory or deemed extensions of the old lease term for SDLT purposes.

The reduction cannot make the rent for any year negative. In practice, the figure used for the new lease cannot go below nil for any year.

What this means in practice

The relief is not a free-standing exemption for the new lease. It is a specific adjustment to the rent figure used in the SDLT calculation for the new lease.

The practical question is: has rent for the overlap period already been brought into charge to SDLT under the old lease? If yes, that earlier rent can reduce the rent counted under the new lease for the same period. If no, there is nothing to relieve.

This is why the source makes two important exclusions clear:

• If the old lease was subject to stamp duty rather than SDLT, overlap relief is not available. That is because no rent under the old lease was taken into account for SDLT purposes.
• If the old lease benefited from an SDLT exemption, and so no rent was taken into account in arriving at the tax due, overlap relief is not available on the replacement lease merely because the periods overlap.

The rule also matters in holdover cases. If a tenant stays in occupation after the contractual end date, the holdover period can be treated for SDLT purposes as an extension of the old lease, potentially creating additional SDLT. If a new lease is later granted on or after 19 July 2006 for substantially the same premises and is expressed to begin on or immediately after the old lease end date, overlap relief may be available for the period between the termination date and the actual grant date, but only if rent for that holdover period has already been taken into account for SDLT.

How to analyse it

A sensible way to approach the issue is to work through these questions.

• Is there an old lease, or notional lease, and a new lease?
• Are the premises the same, or substantially the same?
• Do the lease periods overlap for SDLT purposes?
• What is the overlap period? Usually this is from the grant of the new lease to the date the old lease would have ended for SDLT purposes if it had continued.
• Was the old lease actually within SDLT, rather than the old stamp duty regime?
• Was rent under the old lease taken into account in calculating SDLT? If the old lease was exempt, the answer may be no.
• How much rent under the old lease was taken into account for the overlap period?
• When calculating NPV on the new lease, has the reduction been applied only up to nil, and not beyond?
• If the rent is variable and the highest-rent rule applies, has that highest rent been determined before any overlap relief adjustment?

The point about substantially the same premises is important. HMRC’s example shows that relief can still apply where the new lease covers more space than the old lease, provided all of the property in the old lease is included in the new lease. The manual says this is so regardless of the percentage that the old demise bears to the new one.

Example

Suppose a tenant holds a lease of floors 1 to 3 of an office building, and SDLT has already been paid on that lease using the rent over its term. The parties then reorganise the arrangement. The old lease is surrendered and a new lease is granted over floors 1 to 6.

If the new lease starts before the old lease would have ended for SDLT purposes, there is an overlap period. Because the new lease includes all of the premises in the old lease, HMRC says overlap relief can apply. When working out the NPV of rent on the new lease, the rent for the overlap period is reduced by the rent that was already taken into account for SDLT on the old lease for that same period.

The manual also notes that RPI rent increases are ignored for SDLT purposes under the relevant rules. So if the rent under the new lease is simply higher because it reflects RPI increases from the old lease, that does not by itself prevent full overlap relief for the overlap period.

Why this can be difficult in practice

The main difficulty is that the relief depends on what rent was actually taken into account for SDLT on the old lease. That is a technical question. It may require checking the original SDLT treatment of the old lease, including whether there was substantial performance, whether the lease term was later treated as extended for SDLT, and whether any holdover rent has already been brought into charge.

Another fact-sensitive issue is whether the premises are substantially the same. Some changes are straightforward, such as adding extra space while keeping all of the original demise. Other changes may be harder to classify if the old and new demises only partly match.

Variable rent can also complicate matters. HMRC says that where the highest-rent rule applies, overlap relief is ignored when identifying that highest rent. So the sequence of calculation matters: first determine the highest rent under the variable-rent rule, then consider overlap relief in the NPV calculation in the way the legislation allows.

Finally, this is an HMRC manual page, not the legislation itself. The legal basis is Schedule 17A paragraph 9 Finance Act 2003. The manual is useful for HMRC’s view and examples, but the exact result in a marginal case still depends on the statutory rules and the facts.

Key takeaways

• Overlap relief is designed to stop the same rent period being counted twice for SDLT when one lease replaces or follows another over the same or substantially the same premises.
• The relief only works if rent for the old lease was already taken into account for SDLT. It does not apply just because two lease periods overlap.
• The adjustment reduces the rent used for the new lease’s NPV calculation for the overlap period, but never below nil.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide to Overlap Relief for Stamp Duty Land Tax on Leases

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