Calculation of stamp duty: Rent: Variable or uncertain rent: Example 9
A lease for eleven years is granted on 1 January 2018 with market rent reviews at years four and eight.
- 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 following the market rent review was £150,000.
The original land transaction return includes the net present value (NPV) of the known rent in years one to four of £100,000, the reasonable estimate of £125,000 for year five and the highest rent payable in the first five years (£125,000) for years six to eleven. No estimate has to be made of the outcome of the rent review at year eight, as this is outside the five-year period.
If the first review concluded on 1 July 2022, the following additional return would be required (by way of letter to Stamp Taxes:-
- by 31 July 2022 - A return including the NPV of the lease using actual rents of £100,000 for years one to four and £150,000 for years five to eleven (ignoring the review at year eight)
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:-
- by 30 January 2023 - A revised estimate is made of the market rent, in the sum of £145,000. A return is required (by way of letter to Stamp Taxes) with the NPV calculated using £100,000 known rent for years one to four and £145,000 estimated rent for years five to eleven (ignoring any adjustment for the review at year eight)
- by 31 July 2023 - Another return is required (again 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 eleven (ignoring any adjustment for the review after year eight).