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Do you need to file an extra Stamp Duty Land Tax return?

The rules surrounding Stamp Duty Land Tax (SDLT) are undoubtedly complicated and no one wants to get caught out - hence the need to make sure you avoid some common pitfalls as well as the associated penalties.

There are two key times when it is particularly important to watch your step:

  • When you remain in occupation of a premises following the end of the term of a protected business lease (known as security of tenure), possibly whilst negotiating a renewal. This is often known as 'holding over' but it does have potential SDLT implications. When the original lease was subject to SDLT, then the period of holding over may be also;
  • When an event, like a rent review in the first five years of a lease, triggers the payment of SDLT. If the revised rent is different to the estimate made at the start of the lease, HMRC requires tenants to submit an additional SDLT return form. This may mean a further payment plus interest is due but it could also mean a repayment due to you.

What to do

If you've had a rent review, check to see if this affects your SDLT liability and avoid an out-of-the-blue letter from HMRC.

There are also HMRC rules about rent reviews outside the five year window and which have determined an 'abnormal rent increase'. For example, if the initial rent was low - thus attracting lower SDLT liability - and then shoots up, HMRC will treat this as a new lease and SDLT will be due within 30 days of the date of the rent increase.

If your lease has expired and you are in a period of 'holding over', or are soon to be in a 'holding over' position, it may be wise to take professional advice to avoid late filing penalties.

When a SDLT return is not filed when due then an immediate £100 penalty may be payable plus interest on the amount due and the penalty increases the longer the SDLT return is not filed.

For help and advice please contact Wards Solicitors' Commercial Property team.

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