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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Calculation of stamp duty land tax: Rent: Variable or uncertain rent: Example 2

A lease is granted on 1 January 2009 for a term of five years at a rent of £150,000 per annum with provision for a rent increase on 1 January 2011 to reflect the current market value

Year 1 £150,000
Year 2 £150,000
Year 3,4 & 5 Market rent

As the rent for years 3, 4 and 5 is unascertainable as at the date of grant, a reasonable estimate of the market rent should be used by virtue of FA03/SCH17A/PARA7 and FA03/S51. It is reasonable to use the first “normal” years rent, ie ignoring rent free periods, as the estimate.

A return is submitted by 31 January 2009 with a net present value (NPV) of £ 677,257 and tax due of £5,272

The rent review is concluded on 1 July 2011 and the annual rent for years 3, 4 and 5 is adjusted to market rent of £165,000.

An amended return by way of a letter to Birmingham Stamp Office is required by 31 July 2011, disclosing the actual NPV of £716,488 based on the actual figures (SDLT payable £5,664)and payment of additional tax of £392.

If this review concluded on 1 July 2014 to produce rents for years 3, 4 and 5 of £165,000, the following would be required:

By 31 July 2014 a revised return by way of letter to Birmingham Stamp Office (address is available @ HMRC website within the contact us pages) to give the actual NPV of the lease. Although the five-year point has now passed, the original return has been shown to be incorrect so correction is required to prevent a penalty accruing under FA03/SCH10/PARA8.