Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
, see all updates

Calculation of Stamp Duty Land Tax (SDLT): Rent: Variable or uncertain rent: NPV

Under FA03/SCH17A/PARA7, special rules apply to determine the rent to be taken into account for the net present value (NPV) calculation in any case where the rent, or part of the rent, payable under a lease is variable, contingent, uncertain or unascertainable at the date of grant.

These rules apply where rent is variable because of provisions in the lease, for example where the lease provides for fixed rent increases over the term (note that this is as opposed to the treatment of variations outside the terms of the original lease, which are dealt with at SDLTM15000).

Rent taken into account in respect of each of the first five years of the lease

The actual figures of rent payable are used for the NPV calculation, if known at the date of grant. Where variations in rents are fixed, the calculation will be based on these amounts. If however the rent payable for any of the first five years is either contingent, uncertain or unascertainable at the date of grant, special rules apply to quantify the rent for this period for stamp duty land tax purposes.

Rent taken into account for years after the first five

For the purposes of the NPV calculation, the actual rent payable for any period after the first five years is substituted by the figure of ‘highest rent’ payable in respect of any consecutive twelve-month period in the first five years of the term. To find the highest rent, take the actual rent, if known, or any estimated or assumed figures of rent, for each twelve-month period of the first five years of the term of the lease (beginning with the date of grant) and find the highest figure of rent.

In practice, therefore, any rent changes after the first five years of a variable lease are ignored unless they constitute an ‘abnormal’ increase under FA03/SCH17A/PARA14 and FA03/SCH17A/PARA15. The date of the beginning of this ‘highest rent’ twelve-month period is the start date for the purposes of determining whether an increase in variable rent is ‘abnormal’.

Refer to SDLTM13140 to SDLTM13145 for examples.