Calculation of stamp duty land tax: Rent: Abnormal rent increases: Example
A ten-year residential lease is granted on 1 April 2004 for rent of £10,000 per year, with a rent review at 1 April 2010. On review, the rent is increased to £25,000 per year from 1 April 2010. Using the steps outlined in SDLTM18620:-
1. Find the start date, in this case the beginning of the lease term: 1 April 2004 2. Find Y: number of whole years between start date (1 April 2004) and date new rent first payable (1 April 2010): 6 3. Find R: rent previously taxed= £10,000 (being annual rent payable before increase) 4. Find excess rent: difference between new rent and R= £25,000- £10,000 = £15,000 5. Is the excess rent greater than
|R x Y/5|
15,000 > 10,000 x 6/5 = 12,000 so the rent increase is abnormal in this case.
As the increase is abnormal, it is treated as the grant of a new lease:
* made on the date on which the increased rent first became payable (1 April 2010) * for consideration equal to the rent increase (£25,000 - £10,000 = £15,000 per year), * for a term equal to the unexpired part of the original lease (1 April 2010 to 31 March 2014 = 4 years) and * as linked with the grant of the original lease for the purposes of applying SDLT rates and thresholds (see SDLTM17035).