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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Calculation of stamp duty land tax: Rent: Variable or uncertain rent: Example 8

A lease for seven years is granted on 1 January 2004 with a market rent review after four years (i.e. 1 January 2008).

* an initial rent of £100,000 is payable
* the initial estimate of the rent payable after the market rent review was £125,000
* the actual rent payable after the market rent review was £150,000.

If the review concluded on 1 July 2008 (within the statutory 5-year period), the following land transaction returns would be required:-

* by 31 January 2004 - A land transaction return with the net present value (NPV) calculated using the £100,000 known rent for years one to four and an estimated £125,000 for years five to seven
* by 31 July 2008 - A land transaction return (by way of letter to Birmingham Stamp Office) with the NPV calculated using £100,000 known rent for years one to four and £150,000 known rent for years five to seven

The tax treatment of uncertain rents must be reconsidered at the end of the fifth term of the lease, even if the amount of rent remains uncertain at that date. In this case if the market rent was disputed and the review did not conclude until 1 July 2009 (outside the statutory 5-year period):-

* The estimate of rent payable must be reconsidered as at the end of the 5-year period and revised as necessary. The revised estimate is £145,000.
* As this exceeds the estimate already returned, an additional return is required by 30 January 2009 (by way of letter to [Birmingham Stamp Office](http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=6hAFOpcmkio) (address is available @ HMRC website within the contact us pages) with the NPV of the lease calculated using £100,000 known rent for years one to four and the revised estimate of £145,000 rent for years five to seven.
* Once the actual rent for the first five years is known, the return should be revised to actual figures and any additional tax paid to prevent penalties accruing. Again this is by way of letter to Birmingham Stamp Office.