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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Reliefs and Exemptions: Overlap relief: Example 3

A lease is granted on 1 April 2004 for 25 years (the old lease)

* the date of expiry is 31 March 2029
* rent of £144,000 per annum is payable under this old lease
* net present value (NPV) of the old lease is £2,373,337
* stamp duty land tax (SDLT) of £22,233 is payable on the rent.

The old lease is surrendered and a new lease is granted on 1 October 2008 for 150 years

* rent of £110,000 per annum is payable under this new lease

1. The overlap period is from 1 October 2008 until 31 March 2029, that is, twenty years and six months
2. The rent payable under the new lease is £110,000
3. The rent payable under the old lease is £144,000. This is the amount included in the first NPV calculation.
4. The new lease is not a lease with variable rent and so FA03/SCH17A/PARA7 is not in point. The NPV calculation should use rent of £0 for years 1 to 20 inclusive (as the old rent is more than the new rent but the figure to be included in the calculation cannot be less than £0), £55,000 for year 21 (as the first six months of this year are in the overlap period comparison is made on a month by month or day by day basis to calculate the overlap relief. In the first six months of this year, the old rent is more than the new rent but the figure to be included in the calculation cannot be less than £0 for this six months. In the following six months the rent payable under the new lease is £55,000 and there is no overlap. Thus the rent to include in the calculation for year 21 of the new lease is £0 + £55,000 = £55,000) and rent of £110,000 for years 22 to 150 inclusive to give a NPV of £ 1,534,745 and SDLT due of £13,847.
5. The calculator will not cope with this calculation and it should be performed manually.