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.