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HMRC internal manual

Stamp Duty Land Tax Manual

Calculation of stamp duty land tax: Deposit & loan arrangements: Example 2

A residential lease is granted on 1 June 2008 for a premium of £60,000 for a term of 99 years at an annual rent of £1,000. The premium of £60,000 is taxable at 0% because it does not exceed the residential 0% rate threshold.

The tenant also pays a rent deposit of £5,000 as security for the payment of a separately reserved service charge. As this exceeds twice the relevant maximum rent of £1,000, it is treated as a premium payment for the purposes of calculating stamp duty land tax (SDLT). As the total consideration other than rent (premium plus notional premium) does not exceed the residential 0% rate threshold, no tax is due.

The net present value of the rent is below the residential threshold and is, therefore, not taxable.