LBTT6020 - A lease that continues after a fixed term

LBTT guidance on rules regarding a lease which continues after a fixed term.

The set of rules below only apply in relation to leases subject to LBTT.

A lease may continue after its fixed term by agreement (whether informal or formal) between the parties or by the operation of law (tacit relocation). Such a lease is treated as if it were a lease for the original fixed term and no longer.  If it continues after the end of the term, it is treated as if it were a lease for one year longer. As it continues, each year a further year is added to the term of the lease. If the lease was previously notifiable, no LBTT return is required each time the lease continues, and the details are included in the next three year return.

Where a lease transaction which was not previously notifiable becomes notifiable because of the continuation of the lease beyond its fixed term, a LBTT return will be required within 30 days of the day after the end of the one year period when it became notifiable. The date the return is required to be made by is the filing date (see LBTT1000).

Note: The date of the end of the one year period when the lease became notifiable is the ‘relevant date’ for the purposes of the ‘relevant date’ field in the LBTT return.

The assessment of the amount of tax chargeable should be calculated using the tax rates and bands that were in force at the effective date of the original lease. Any additional tax due must be paid at the same time as the LBTT return is made.

Guidance on How to make an LBTT return and pay tax is available separately on our website.

Once the LBTT return has been made, subject to certain restrictions it can be amended up to 12 months after the filing date - see LBTT4006.

 

A tenant who fails to make a LBTT return to us by the filing date is liable to a penalty (see RSTP3005). If the return contains an inaccuracy, the tenant may also be liable to a penalty (see RSTP3011).

A tenant who fails to pay tax prior to the expiry of 30 days after the date payment is due (the day the LBTT return is made) is liable to a penalty (see RSTP3008). Interest will be charged however on the amount of any unpaid tax from the filing date until the date it is paid (see RSTP4002).

A tenant required to make a LBTT return to us, or who is the tenant in a land transaction which is not notifiable, is also required to keep and preserve certain records. See LBTT9001 for further guidance.

LBTT(S)A 2013 schedule 19 paragraph 20

However, where a lease continues beyond its fixed term and during the one year period beyond the fixed term a new lease is granted to the tenant for the same (or substantially the same) premises, then the new lease is treated as beginning immediately after the end of the fixed term of the original lease. Any rent which was payable under the original lease after the end of the fixed term is treated as payable under the new lease. If the original lease has been extended more than once then the new lease is treated as beginning immediately after the end of the original lease as it was extended.

LBTT(S)A 2013 schedule 19 paragraph 21

Ref ID: 
LBTT6020
Archive Date: 
9 March 2015
Last updated: 
9 March 2015
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