SDLTM13235 - Calculation of stamp duty: Rent: Variable or uncertain rent: Example 8

A lease for seven years is granted on 1 January 2018 with a market rent revision after four years.

• an initial rent of £100,000 is payable
• the initial estimate of the rent payable after the market rent review was £125,000
• the actual rent payable after the market rent review was £150,000.

If the review concluded on 1 July 2022 (within the statutory 5-year period), the following land transaction returns would be required:-

• by 31 January 2018 - A land transaction return including the net present value (NPV) calculated using the £100,000 known rent for years one to four and an estimated £125,000 for years five to seven
• by 31 July 2022 - A land transaction return by way of letter to Stamp Taxes, with the NPV calculated using £100,000 known rent for years one to four and £150,000 known rent for years five to seven

The tax treatment of uncertain rents must be reconsidered at the end of the fifth term of the lease, even if the amount of rent remains uncertain at that date. In this case if the market rent was disputed and the review did not conclude until 1 July 2023 (outside the statutory 5-year period):-

• The estimate of rent payable must be reconsidered as at the end of the 5-year period and revised as necessary. The revised estimate is £145,000.
• As this exceeds the estimate already returned, an additional return is required by 30 January 2023, by letter to Stamp Taxes, including the NPV of the lease calculated using £100,000 known rent for years one to four and the revised estimate of £145,000 rent for years five to seven.
• Once the actual rent for all the first five years is known, the return should be revised to actual figures and any additional tax paid to prevent penalties accruing. Again this is by way of letter to Stamp Taxes.