Lease Extension Example: SDLT Implications for Continuing Non-Residential Lease Beyond Fixed Term

SDLT on a Protected Lease That Continues After the Fixed Term

If a protected business lease carries on after its fixed term ends because the tenant stays in occupation, SDLT may rise even though the original lease has expired. HMRC treats the lease as continuing one year at a time, recalculates the tax as if the lease had always been granted for the longer term, and only the extra SDLT must then be paid.

• HMRC’s example involves a 10-year non-residential lease from 25 March 2005 at an annual rent of £60,000, with original SDLT of £3,489 based on an NPV of £498,996.
• When the tenant remained after expiry on 24 March 2015, the lease was treated as if it had originally been for 11 years, increasing the NPV to £540,093 and SDLT to £3,900, so an extra £411 became due.
• If the tenant stayed for a second extra year, the lease was then treated as if it had originally been for 12 years, increasing the NPV to £579,800 and SDLT to £4,298, creating a further £398 liability.
• The extra amount is not the full SDLT recalculated from scratch in cash terms; you deduct the SDLT already paid and only pay the difference.
• HMRC says the extra SDLT must be notified within 30 days after the end of each further year of holding over, not immediately after the fixed term ends.
• In practice, care is needed over whether the tenancy is protected, when holding over starts, whether rent changed, and whether a new lease has replaced the old one.

Scroll down for the full analysis.

SDLT when a protected lease continues after its fixed term: worked example of yearly holding over

This page explains how SDLT can increase after a lease’s stated end date if the tenant stays in occupation and the lease is treated as continuing year by year. The example comes from HMRC’s SDLT manual and shows the practical effect for a non-residential lease protected by the Landlord and Tenant Act 1954.

What this rule is about

For SDLT on leases, the tax is based in part on the rent payable over the term of the lease, using a net present value calculation. That means the length of the lease matters. If a lease does not simply end on its contractual expiry date, the SDLT position may need to be revisited.

This is particularly relevant where a business tenancy is protected by the Landlord and Tenant Act 1954. In that situation, when the fixed term ends, the tenant may remain in occupation while the parties negotiate a new lease. For SDLT purposes, the old lease may then be treated as continuing beyond its express term.

What the official source says

HMRC’s example deals with a 10-year non-residential lease granted on 25 March 2005. The lease ended on 24 March 2015, but the tenant stayed in occupation and continued paying the same annual rent of £60,000 while negotiations for a new lease continued.

The lease had originally been notified on 20 April 2005. At that point, the net present value of the rent was returned as £498,996 and SDLT of £3,489 was paid.

HMRC then treats the lease as extended one year at a time:

• From 25 March 2015, the lease is treated as if it had originally been granted for 11 years rather than 10.
• The NPV for that notional 11-year lease becomes £540,093.
• The SDLT on that basis is £3,900.
• Because £3,489 had already been paid, the additional SDLT due is £411.

HMRC says that this additional amount should be notified to Stamp Taxes within 30 days after the end of the first year of holding over. In the example, that means by 23 April 2016.

If the tenant is still in occupation after that first extra year, the process repeats:

• From 25 March 2016, the lease is treated as if it had originally been granted for 12 years.
• The NPV becomes £579,800.
• The SDLT on that basis is £4,298.
• Since £3,900 has by then already been paid in total, the further SDLT due is £398.

HMRC says that this further amount should be notified within 30 days after the end of the second year of holding over, which in the example is by 23 April 2017.

What this means in practice

The important point is that SDLT does not necessarily stop being relevant once the original lease return has been filed. If a protected lease continues after the fixed term, the lease may be treated as having a longer term for SDLT purposes, and that can increase the tax due.

The tax is not recalculated from scratch in the sense of paying the full amount again. Instead, you compare:

• the SDLT that would have been due if the lease had originally been granted for the longer notional term, and
• the SDLT already paid.

You then pay only the difference.

In practical terms, this creates a rolling compliance obligation. Each additional year of continued occupation may trigger a fresh review. If the tenant is still holding over at the end of that extra year, a further calculation may be needed.

How to analyse it

A sensible way to approach this is to ask the following questions:

• Was the original lease one to which this continuation treatment applies, such as a business tenancy continuing after expiry?
• Did the tenant remain in occupation after the fixed term ended?
• Did rent continue to be payable during that period, and on what terms?
• What SDLT was originally paid based on the original lease term?
• If the lease is treated as extended by one more year, what is the revised NPV and revised SDLT?
• How much extra SDLT is due after deducting what has already been paid?
• Has the holding-over period reached the end of a further year, so that a notification deadline has arisen?

The example also shows an important timing point. HMRC’s approach is not to require an immediate return the day after the fixed term expires. Instead, the further notification is due within 30 days after the end of the first year of holding over, and again within 30 days after the end of the second year if the tenant remains in occupation.

Example

Illustration based on HMRC’s figures:

A company takes a 10-year shop lease starting on 25 March 2005 at a fixed annual rent of £60,000. SDLT is paid at the start based on a 10-year term.

The lease expires on 24 March 2015, but the tenant stays in the premises while negotiating a renewal. The same rent continues to be paid. For SDLT purposes, the lease is treated as continuing.

After the first extra year, the lease is treated as if it had been an 11-year lease from the start. That increases the NPV and produces extra SDLT of £411 after credit for the tax already paid.

If the tenant is still there after a second extra year, the lease is then treated as if it had been a 12-year lease from the start. That produces a further SDLT liability of £398 after credit for the amounts already paid.

Why this can be difficult in practice

The official example is straightforward because the rent stays fixed and the tenant simply remains in occupation while negotiations continue. Real cases may be less neat.

Difficulties can arise over:

• whether the tenancy is in fact one that continues in a way that triggers this SDLT treatment
• the exact date from which the holding-over period runs
• whether the rent after expiry is the same as before, or has changed
• whether a new lease has actually been granted, replacing the old position
• keeping track of earlier notifications and payments so the correct net additional SDLT is calculated

Another practical difficulty is that the calculation is cumulative. Each year, you are not just taxing that extra year in isolation. You recalculate the SDLT position by treating the lease as having had the longer term from the outset, then deduct what has already been paid.

The example is also manual guidance rather than legislation itself. Its value is that it shows how HMRC applies the rule in practice, especially on timing and the method of calculating additional tax.

Key takeaways

• If a protected non-residential lease continues after its fixed term, SDLT may increase because the lease is treated as lasting longer.
• The extra SDLT is the difference between the tax on the longer notional term and the tax already paid.
• This review can repeat year by year while the tenant remains in occupation, with a fresh notification after each additional year of holding over.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Lease Extension Example: SDLT Implications for Continuing Non-Residential Lease Beyond Fixed Term

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