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HMRC internal manual

Stamp Duty Land Tax Manual

Variation of leases: Increasing rent in the first five years: Example 2

Example 2 - SDLT lease - variation to increase the rent

A lease runs from 1 September 2004 to 31 August 2024 (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 2009. Prior to the first rent review, the landlord and tenant agree to vary the lease, with effect from 1 September 2007, to increase the rent to £300,000.

SDLT is payable on the increase of £200,000 in the rent, the calculation of the NPV assuming the deemed grant of a new lease at an annual rent of £200,000 for the remaining 17 years of the lease, from 1 September 2007 to 31 August 2024.

The rent review on 1 September 2009 does not trigger an SDLT charge unless it is an abnormal increase from the increased rent (i.e. £300,000). This is because an SDLT charge on rent review (if it is not an abnormal increase) only applies if the review is within the first 5 years of the original lease - not the deemed new lease.

Further, as the effective date of the new lease is 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.

Note: A deemed new lease and SDLT charge only apply in relation to this variation because it takes place within the first 5 years of the lease - and is therefore chargeable under FA03/SCH17A/PARA13. If the variation had taken place out with the first 5 years e.g. on 1 October 2009, then there would have been no deemed new lease. In that case SDLT would only be chargeable if the rent increase was such as was considered to be an abnormal increase in terms of FA03/SCH17A/PARA14.