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HMRC internal manual

Stamp Duty Land Tax Manual

Term of a lease: Surrender of existing lease and grant of new lease to increase the term and/ or increase the rent: Example 2

Example 2 - Stamp duty lease - renunciation and grant of new lease to increase the rent

A lease runs from 1 September 2003 to 31 August 2023 (20 years) at a rent of £100,000. It is subject to 5 yearly rent reviews, the first of which would be on 1 September 2008. On 1 September 2006 the tenant renounces the lease and a new lease is granted with a rent of £300,000 and which expires on 31 August 2023.

SDLT is payable on the new rent for the full period of 17 years of the new lease (1 September 2006 to 31 August 2023). There is no overlap relief because overlap relief only applies if the lease being renounced was subject to the SDLT regime.

As there will be a rent review (on 1 September 2008) which is within the first 5 years of this new lease, then the contingent or unascertainable rent provisions shall apply [see SDLTM18520]. This means that:-

1. a reasonable estimate of the reviewed rent has to be used. It is acceptable to use the passing rent; and
2. a further land transaction return will require to be submitted and (if there is an increase in rent at that review date) further SDTL payable, following the determination of that review or, if earlier, by 1 September 2011 - i.e. 5 years after the start of the new lease.

Further, as the effective date of the new lease is now after 1/12/03, the abnormal rent increase provisions may apply to (i) any subsequent rent review increase in rent or (ii) any other variation in the rent.