It’s not uncommon when a tenant has security of tenure for it to hold over at the end of the contractual term while new lease terms are negotiated and the new lease is completed. However, under the SDLT regime, a tenant can be obliged to make a supplemental SDLT return and make an interim payment of SDLT before the renewal lease is completed!

If a tenant is holding over on a lease granted on or after 1 December 2003, HM Revenue and Customs require a further calculation of SDLT to be undertaken. For the purposes of the calculation it is to be assumed that the original term of the lease has been extended by 12 months. If this calculation indicates that additional duty is payable, notification must be given to HM Revenue and Customs by letter with sufficient information to identify the original transaction, including the parties, property, duty already paid and the unique SDLT return reference. As is usual, if any SDLT is payable this must be paid promptly but most crucially within 30 days of the start of the holding over period. If holding over continues for more than 12 months then a further calculation is required and, if necessary a further payment, again within 30 days.

In effect this will probably mean that at least two SDLT returns will be required during the lease renewal process, one at the start of the holding over period and one on completion of the lease. There is some consolation in that if a further SDLT return is required for the new lease, credit will be given for any SDLT paid on account of the holding over period.