Lease for Indefinite Term: Tax Procedures and Notification Requirements Explained

SDLT on leases granted for an indefinite term

For SDLT, a lease granted for an indefinite term is not treated as lasting forever from the start. Instead, it is taxed as a one-year lease first, then reviewed each year it continues. This can lead to extra SDLT, a further return, or a first SDLT filing if the lease later becomes notifiable.

• At the start, SDLT is calculated as if the lease lasts for one year only.
• If the lease is still running after that year, the tax must be recalculated as if the lease lasted two years, then three years, and so on.
• If a return was filed originally, a further return may be needed each time the lease continues beyond the period already used, along with any extra tax due.
• If no return was needed at first, the lease may later become notifiable because it continues, and the effective date stays as the original grant date.
• HMRC guidance says further notifications should include the original UTRN where there was one, the revised SDLT calculation, and payment within the relevant deadline.
• Care is needed with deadlines and procedure, as HMRC guidance refers to different timing rules and a specific process for reporting continued indefinite leases.

Scroll down for the full analysis.

SDLT on a lease for an indefinite term: when extra returns and tax can arise

This page explains how Stamp Duty Land Tax works where a lease is granted for an indefinite term rather than for a fixed number of years. The key point is that SDLT does not treat the lease as endless from the start. Instead, it is taxed one year at a time. If the lease continues, the tax position must be revisited, and a further return or payment may be needed.

What this rule is about

Most leases are granted for a fixed term, such as 5 years or 10 years. But some leases are granted for an indefinite term. For SDLT purposes, those leases are not taxed once and left alone. The legislation treats the lease initially as if it were granted for a fixed term of one year.

If the lease is still in existence after that first year, it is then treated as if it were a lease for a fixed term of two years. If it continues further, it is treated as a lease for three years, and so on.

This matters because SDLT on leases depends on the term used in the tax calculation. A longer assumed term can change the tax due or can make a transaction notifiable when it was not before.

What the official source says

The HMRC manual says that a lease for an indefinite term is taxed first as a one-year lease. If it continues beyond the period already taken into account, the tax must be recalculated on the basis of a lease that is one year longer.

The procedure depends on what happened when the lease was first granted:

• If the original transaction was notified on an SDLT return but no tax was due, and the lease continues after the first year, a further return is required once the tax is recalculated for a two-year term, and again on later anniversaries if relevant.
• If the original transaction was notified and tax was paid, and the lease continues beyond the term already notified, a further return is required based on a lease for one year longer than the term already used, together with any additional tax due.
• If the original transaction was not notifiable at first, but continuation of the lease means it now becomes notifiable, an SDLT1 must then be filed. The effective date remains the original grant date.

The manual also says that these further notifications are made by writing to the Stamp Office with the relevant details, including the UTRN of the original return where there was one, the revised tax calculation, a self-assessment of the tax due, and payment within the applicable time limit.

For leases that become notifiable for the first time because of continuation, the manual states that from 1 March 2019 the return and tax must be made within 14 days of the end of the latest period of continuation.

What this means in practice

You cannot assume that the SDLT position for an indefinite lease is settled when the lease is first granted. The position may need to be checked again each time the lease passes the end of the period already used in the SDLT calculation.

In practical terms:

• At the start, calculate SDLT as if the lease lasted one year.
• If the lease is still running at the end of that year, recalculate as if it lasted two years.
• If it is still running at the end of the second year, recalculate as if it lasted three years.
• Continue in the same way for later years if the lease keeps going.

If the revised calculation produces more tax, that extra tax must be paid. If the continuation pushes the lease over the notification threshold, a return that was not needed at the start may later become required.

The timing point is important. The manual links the filing and payment deadline to the end of the term already notified or, where the lease becomes notifiable for the first time because of continuation, to the end of the latest period of continuation.

How to analyse it

A sensible way to approach an indefinite lease is to ask these questions in order:

• Was the lease granted for an indefinite term rather than a fixed term?
• What term was used in the original SDLT treatment: one year, or a later year if there has already been a recalculation?
• Has the lease continued beyond the end of that already-notified period?
• If so, what does the SDLT calculation look like if the lease is treated as lasting one year longer?
• Was an SDLT return filed originally? If yes, use the original UTRN when making the further notification.
• If no return was filed originally, has the continuation now made the lease notifiable?
• What is the filing and payment deadline measured from the end of the relevant period?

It is also important to keep records of the original filing position, the term already used in the calculation, and the date the lease passed each anniversary. Without that, it is easy to miss the point at which a further return or extra tax becomes due.

Example

Illustration: a tenant is granted a lease for an indefinite term. On the grant date, SDLT is worked out as if the lease lasted one year. A return is filed, but no tax is due.

The lease is still continuing after the end of the first year. The SDLT position must now be recalculated as if the lease had been granted for two years. If that revised calculation produces tax, a further notification must be sent to the Stamp Office with the revised calculation and payment of the tax due within the required time limit.

If the lease then continues beyond the second year, the process is repeated on the basis of a three-year term.

Why this can be difficult in practice

The main difficulty is that the tax treatment changes over time even though the legal grant has already happened. People often assume SDLT is dealt with once, at completion, and then finished. For indefinite leases, that assumption can be wrong.

Another difficulty is procedure. The HMRC material here describes further returns being made by letter to the Stamp Office, rather than simply filing a fresh ordinary return in the same way as at the start. That makes it important to follow the specific HMRC process described for this type of case.

There can also be timing confusion. The manual uses different wording depending on whether there was an original return and whether the lease only later becomes notifiable. Care is needed to identify which deadline applies.

Finally, if no return was needed at first, the effective date remains the original grant date once a return later becomes required. The manual also states that no penalties will be charged if the return is made within 30 days of the continuation that triggers notification, but it separately states that from 1 March 2019 the return and tax must be made within 14 days of the end of the latest period of continuation. That means the exact procedural position should be checked carefully against the relevant period and HMRC practice.

Key takeaways

• An indefinite lease is taxed initially as if it were a one-year lease, then revisited year by year if it continues.
• Continuation can create extra SDLT, trigger a further return, or make a previously non-notifiable lease become notifiable.
• The filing method, original UTRN, and deadline all matter, and the relevant time limit depends on the procedural history of the lease.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Lease for Indefinite Term: Tax Procedures and Notification Requirements Explained

View all HMRC SDLT Guidance Pages Here