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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Calculation of stamp duty land tax: Rent: Abnormal rent increases

Where a rent increase is regarded as ‘abnormal’ for stamp duty land tax (SDLT) purposes, the increase is treated as the grant of a new lease for the balance of the term of the original lease, for consideration equal to the rent increase. These provisions (at FA03/SCH17A/PARA14 & FA03/SCH17A/PARA15 as amended by FA06/SCH25) apply whether the increase is in accordance with the terms of the lease whether by reason of rent, review or otherwise, or by way of variation of it, but only:

* to increases in rent payable after the end of the fifth year of the term of a lease and
* where the lease was subject to SDLT at the date of grant or deemed grant.

To find whether the increase is abnormal for SDLT purposes:

1. Find the start date, which will be either

* The beginning of the lease term (see para (13180) above), or
* If the rent is uncertain or variable, the beginning of the ‘highest rent’ period within the first five years (see [SDLTM18505](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm18505)), or
* If there has been a variation or variations in the lease within paragraph 13 (see [SDLTM19010](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm19010)), the date of the (most recent) variation, or
* If paragraph 14 has previously applied, the date of the last increase to which it applied.

1. Find Y: the number of whole years between the start date and the date on which the new rent is first payable
2. Find R: the rent previously taxed, which will be either

* The rent payable under the lease before the increase, or
* If the rent is uncertain or variable, the ‘assumed rent’ payable after the fifth year (see [SDLTM18520](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm18520)),or
* If there has been a variation or variations in the lease within paragraph 13 (see [SDLTM19010](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm19010)), the rent payable as a result of the (most recent) variation, or
* If paragraph 14 has previously applied, the rent payable as a result of the (last) increase to which it applied.
* Overlap relief is disregarded for these purposes (see [SDLTM19305](https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm19305)).

1. Find the excess rent: the difference between the new rent and the rent previously taxed. The new rent is the rent payable as a result of the increase, or the ‘assumed rent’ payable if it is uncertain or variable.
2. The rent increase is regarded as abnormal for SDLT purposes if the excess rent
  is greater than R x Y/5
     

All references are to annual rent.

An example follows at SDLTM18595.

For details of how additional tax is calculated on abnormal rent increases, see SDLTM18630 and SDLTM18635.