Stamp Duty Land Tax on a Lease Extension
Stamp Duty Land Tax on a Lease Extension
May 9, 2023

Extending your lease term may not be as straightforward as it appears.

A lease extension will be considered as a surrender of the existing lease and the grant of a new lease even if the document recording the agreement between landlord and tenant is titled as a ‘variation’. Furthermore, the old lease will be considered as coming to an end.

A surrender and regrant is a disposal and an acquisition for Stamp Duty Land Tax purposes.

Stamp Duty Land Tax, commonly known as SDLT, will be payable on the grant of the new lease by reference to the rent payable under the lease and any other consideration (money or money’s worth), such as a premium. It is common for a Landlord to demand a premium in return for an extended lease. So, any new rent agreed upon, as well as a premium paid for extending the lease term, can attract SDLT. The amount of tax payable will be calculated by reference to the relevant SDLT thresholds.

Overlap Relief

In relation to SDLT on the rent, overlap relief may be available. However, you should note that the relief is only available if the existing lease was subject to SDLT (it is not available if old stamp duty was payable). It should be noted that overlap relief is not available if the old lease was granted before SDLT was introduced (1st December 2003).

A tenant is not entitled to a refund of any stamp duty originally paid on the grant of the existing, old lease.

The “overlap period” is the period between the date of grant of the new lease and what would have been the end of the term of the existing, old lease had it not been surrendered.

The rent under the new lease can only be reduced by the rent payable under the old lease for the overlap period if that rent was taken into account in calculating SDLT under the old lease.

In relation to ‘money or money’s worth’, the grant of the new lease should not count as chargeable consideration for the surrender, and the surrender should not count as chargeable consideration for the grant of the new lease. 

This means that, on surrender and regrant, no SDLT will be payable by reference to a deemed premium; however, SDLT will be payable in the normal way in relation to any rent payable (subject to overlap relief).

If there is cash consideration for the surrender or a premium for the new lease, these will attract SDLT (subject to the regular rates/thresholds) in the normal way.

Solicitor Lease Extension

If you are seeking to extend your lease and are unsure where you stand in relation to the fees surrounding UK stamp duty or any other matter, Bridge McFarland’s experienced team of property solicitors and licensed conveyancers would be happy to help.

Please get in touch regarding your matter today on 0800 987 8800 or email Alternatively, please fill in this contact form.

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