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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs and Exemptions: Overlap Relief: Rent taken into account

What is included in the term ‘rent taken into account’ on completion of a lease following substantial performance?

SDLT is due on substantial performance of an agreement for lease based on the rents for the first five years, if the rent increases in year six it is ignored in the calculation of the NPV.

If the lease is then granted nine months after substantial performance, what rent has been taken into account for the purposes of paragraph 9 Schedule17A Finance Act 2003 (overlap provisions)? Does it include the increase in year six?

On substantial performance the rent for the first five years was taken into account when calculating the NPV but what about the increase in year six? Although not included in the calculation was it taken into account in determining the rent?

It is accepted that where there has been no change to the terms of the lease (i.e. by variation etc) the increased rent in year six has been ‘taken into account’ on substantial performance, for the purposes of paragraph 9, in relation to the grant of the lease.

Therefore if there are no changes between substantial performance and completion there can be no additional SDLT to pay.

N.B. Where there is an ‘abnormal increase’ after the fifth year the usual rules apply and further tax may be due at that time.