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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Variation of leases: Increasing rent in the first five years

Where a lease is varied to increase the rent in the first five years of the lease (but outside the terms of the lease, such that the variation does not fall to be included in any calculation of net present value (NPV) under FA03/SCH17A/PARA7: see SDLTM18455), the variation is treated as if it were the grant of a new lease in consideration of the additional rent payable, under FA03/SCH17A/PARA13.

This applies:

* to leases granted both before and after 1 December 2003
* where rent is increased, whether by virtue of an agreement between the tenant and landlord or Court order
* where rent is increased because of a rent review outside the express terms of the lease

A lease which was subject to stamp duty rather than stamp duty land tax (SDLT) when granted will therefore never be subject to a SDLT charge if it is varied only to increase the rent (as this will be after the end of the fifth year).

An increase in rent as a result of a landlord’s election to waive exemption from VAT (merely adding the VAT to the existing rent) is not treated as a variation of a lease to increase the amount of rent.

Statutory rent reviews under the legislation governing agricultural leases are not variations of the lease. When calculating the NPV of rent under such tenancies, a reasonable estimate must be made initially of the rent for the first five years, to be revised after five years or once the rent becomes certain (see SDLTM18530).

For variations in rent after the fifth year of the term of the lease, see the abnormal rent increase provisions at SDLTM18620 - SDLTM18635.