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HMRC internal manual

Stamp Duty Land Tax Manual

Calculation of stamp duty land tax: Rent: Abnormal rent increases: Calculation

Once a rent increase is identified as abnormal for stamp duty land tax (SDLT) purposes (see SDLTM13250), it is treated as the grant of a new lease:

* made on the date on which the increased rent first became payable
* for consideration equal to the rent increase
* for a term equal to the unexpired part of the original lease, and
* as linked with the grant of the original lease (for the purposes of applying SDLT rates and thresholds).

The rates and thresholds applying to calculate SDLT on the notional lease are those in force as at the date of notional grant (when the increased rent first becomes payable). To calculate the additional tax due:-

1. Calculate the net present value (NPV) of the rent increase, taking the excess rent payable for each year (or part year) of the notional term.
2. Aggregate the NPV of the rent increase with the NPV of the original lease to give the total net present value (TNPV) which is then applied to the relevant threshold (as at the date of notional grant) to give total tax payable. See FA03/S55(4).
3. Find the proportion of the total tax applicable to the notional new lease, using the formula:
  total tax x NPV/TNPV

where NPV = the NPV of the rent increase.

A return is made (using form SDLT1) showing tax due on the notional new lease  

1. The proportion of total tax applicable to the original lease must then be calculated using the rates and thresholds applying at the date of original grant: deduct the relevant threshold from TNPV and apply the relevant percentage rate to arrive at the total increased tax due.
2. The proportion of this increased tax applicable to the original lease is then calculated using the formula as in 3. above (where NPV = the NPV of the original lease).
3. Deduct any tax already paid in respect of the original lease to arrive at the additional tax due for the original lease. A further return is required (by way of letter to the [Birmingham Stamp Office]( (address is available @ HMRC website within the contact us pages) in respect of this additional amount. For notification purposes the effective date is that of the later, notional grant.

Note that the original and notional leases here are linked, and the NPV aggregated, for the purposes of applying the relevant thresholds and rates fairly and proportionately, in accordance with FA03/S55(4) and FA03/SCH5/PARA2. These linked leases are not successive and the provisions of FA03/SCH17A/PARA5 do not apply.

For further details of treatment of linked leases, see SDLTM19635.

An abnormal rent calculator is included on the Stamp Office website. An example of a manual calculation is included at SDLTM18635.