Reliefs and Exemptions: Overlap relief: Example 4
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
- the net present value (NPV) of the old lease is £2,373,337
- stamp duty land tax 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 £175,000 per annum is payable under this new lease
The overlap period is from 1 October 2008 until 31 March 2029, that is, twenty years and six months
The rent payable under the new lease is £175,000
The rent payable under the old lease is £144,000. This is the amount included in the first NPV calculation.
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 £31,000 for years 1 to 20 inclusive (being new rent £175,000 less old rent £144,000), £103,000 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 new rent is £87,500 less old rent of £72,000 to give £15,500. In the following six months the rent payable under the new lease is £87,500 and there is no overlap. Thus the rent to include in the calculation for year 21 of the new lease is £15,500 + £87,500 = £103,000) and rent of £175,000 for years 22 to 150 inclusive to give NPV of £2,889,750 and SDLT due of £27,397.
The calculator will not cope with this calculation and it should be performed manually.