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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 (SDLT): Rent: Variable or uncertain rent: Example 2

A lease is granted on 1 January 2004 for a term of five years at a rent of £150,000 per annum with provision for a rent increase on 1 January 2006 to reflect the current market value

Year 1 £150,000
   
Year 2 £150,000
Years 3, 4 & 5 Market rent

As the rent for years 3, 4 and 5 is unascertainable as at the date of grant, a reasonable estimate of the market rent should be used by virtue of FA03/SCH17A/PARA7 and FA03/S51. The estimate is that the rent will be £160,000 for each of these years. A return is submitted by 31 January 2004 with a net present value (NPV) of £703,411 and tax due of £5,534

The rent review is concluded on 1 July 2006 and the annual rent for years 3, 4 and 5 is adjusted to market rent of £165,000.

An amended return by way of a letter to The Compliance Team, Birmingham Stamp Office (the address is available within the contact us section of the HMRC website) is required by 31 July 2006, disclosing the actual NPV of £716,488 based on the actual figures and payment of additional tax of £110.

If this review concluded on 1 July 2009 to produce rents for years 3, 4 and 5 of £165,000, the following would be required:

  1. by 31 January 2009 a revised return by way of letter to The Compliance Team, Birmingham Stamp Office if it was reasonable at that date to estimate that the rent would be more than the previous estimate of £160,000 in respect of years 3, 4 and 5 (by virtue of FA03/SCH17A/PARA8(1)(a) andFA03/SCH17A/PARA8(3));
  2. by 31 July 2009 a revised return by way of letter to The Compliance Team, Birmingham Stamp Office to give the actual NPV of the lease, even if a return had been made under (1) above. Although the five-year point has now passed, the original return has been shown to be incorrect so correction is required to prevent a penalty accruing under FA03/SCH10/PARA8.