Transitional lease – expiry of lease (“tacit relocation”)


A ten year lease with an annual rent of £120,000 was executed on 1 February 2005. An SDLT return was submitted and resultant tax paid.

The lease expired on 31 January 2015, but the lease holder continued to occupy the premises without formally renewing the previous lease (sometimes referred to as “tacit relocation”). The rent continued to be paid at £10,000 per month.

On 1 June 2015, the parties agreed to, and completed, a new lease of 10 years at £120,000 per annum to run from 1 February 2015.

The effective date will be 1 June 2015 and the return due date will be 30 days after completion.

The chargeable consideration will be all of the rent (and any premium) for the whole of the new lease. It should be noted that this includes the rent relating to February and March 2015, as the chargeability relates to the whole term of the lease constituted at the effective date, which is after 1 April 2015.

The Net Present Value (NPV) is calculated using the £120,000 payable in each of the ten years. This results in a NPV of £997,992.64.

Using the rates and bands for leases, the total tax chargeable would be :

(£150,000 x 0%) + (£847,992.64 x 1%) = £8,479

The date for the first three yearly review will be the third anniversary of the effective date of the transaction, 1 June 2018. This return must be made to us by the filing date of 1 July 2018.

Last updated