Where a lease is granted for an indefinite term, the legislation makes provision to determine how long the lease lasts. For notification purposes, a lease with an indefinite term is defined as a lease for a term of less than seven years and includes an interest or right terminable by a period of notice or by notice at any time. A lease is not treated as being for an indefinite term if the term can be ascertained from the lease or agreement for lease.
The continuation of the lease may trigger notification of the lease and, if the lease continues, may result in tax being chargeable.
The lease is treated as a lease for a fixed term of one year. If it continues, it is treated as a lease for a fixed term of two years, then three years, and so on. If no LBTT return has been made but, as result of the continuation of the lease the lease becomes notifiable, the tenant must submit an LBTT return within 30 days of the day after the end of the one year period at which the transaction 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 LBTT return must include an assessment of the amount of tax chargeable, which should be calculated using the tax rates and bands that were in force at the effective date of the transaction. Any additional tax due must be paid at the same time as the 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 22