Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
, see all updates

Calculation of stamp duty land tax: Lease premium: Relevant rental figure: Example 4

This page relates only to the calculation of the relevant rental figure for the purposes of calculating stamp duty land tax (SDLT) on premiums, under FA03/SCH5/PARA9 (2A) and (3). Where consideration for a lease is in the form of both premium and rental payments special provisions apply which mean that the nil rate band is not available in respect of the premium if the average annual rent (called the “relevant rental figure”) exceeds £1,000 per annum (see SDLTM18410). The rental figures used for determining net present value and for determining whether the nil rate band is available on the premium may be different- see SDLTM18455.

Example 4

A non-residential lease for 175 years is granted on 1 January 2009 for a premium of £90,000 and a ground rent of £200 per year. The ground rent doubles every 25 years for the first 100 years.

The rent in this case is variable so, per FA03/SCH5/PARA9 (3), the relevant rental figure is the highest ascertainable annual rent during the term of the lease:-

The ground rent payable in years 1 - 25 is £200;

The ground rent payable in years 26 - 50 is £400;

The ground rent payable in years 51 - 75 is £800 and

The ground rent payable in years 76 - 100 is £1,600.

The relevant rental figure is therefore £1,600.

As this is more than £1,000, the 0% residential threshold is not available for the purposes of calculating tax on the premium. The premium is taxable at 1% as it is below the £250,000 threshold.