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HMRC internal manual

Stamp Duty Land Tax Manual

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).

For details of how additional tax is calculated, see SDLTM18630 and SDLTM18635.