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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Calculation of stamp duty land tax: Rent: Net present value: Example of manual calculation

A lease is granted for a fixed term of ten years and the rent payable in each year (perthe lease document) is as follows:

Year 1 Rent £4000
   
Year 2 Rent £5000
Year 3 Rent £6000
Year 4 Rent £7000
Year 5 Rent £8000
Year 6 Rent £9000
Year 7 Rent £9500
Year 8 Rent £10000
Year 9 Rent £10500
Year 10 Rent £11000

The net present value (NPV) of the rental over this period is calculated as follows:

Year 1 4,000/(1+0.035) £3,864.73
     
Year 2 5,000/[(1+0.035) x (1+0.035)] £4,667.55
Year 3 6,000/[(1+0.035) x (1+0.035) x (1+0.035)] £5,411.66
Year 4 7,000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £6,100.10
Year 5 8,000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £6,735.79
Year 6 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £6508.00
Year 7 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £6287.93
Year 8 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £6075.29
Year 9 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £5869.85
Year 10 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] £5671.35
  Total £57192.25

The NPV is the sum of the calculated values, that is £57,192, rather than the £80,000rent actually payable in accordance with the lease.

Note that for the purposes of the calculating NPV, the figure of £8,000 is used for years6 to 10 inclusive as this is the highest rent payable in any consecutive twelve monthperiod in the first five years.

This figure replaces the rent actually payable for these years for the purposes of the NPVcalculation only.