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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Variation of leases: Minute of extension and variation: Example 1

Example 1 - Stamp duty lease - minute of extension and variation

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. Prior to the first rent review, the landlord and tenant agree to vary the lease, with effect from 1 September 2006, to (i) increase the rent to £300,000 and (ii) to extend the term by 8 years so that it expires on 31 August 2031.

The two variations result in two deemed new leases.

The first deemed new lease arises as a result of the increase of £200,000 in the rent, for the remaining 17 years of the original term of the lease, from 1 September 2006 until 31 August 2023.

The second deemed new lease arises as a result of the 8 year increase in the term for the period from 1 September 2023 to 31 August 2031.

However the successive linked lease provisions in FA03/SCH17A/PARA5 apply. Therefore (i) both elements are dealt with on a single land transaction return under the successive linked lease provisions and (ii) the two deemed new leases are treated as the grant of a single lease, at the time of the grant of the first deemed lease, for a term equal to the aggregate of the terms of both of the deemed leases and in consideration of the rent payable under both of the deemed leases.

In this case:-

1. the first deemed new lease runs from 1 September 2006 and the second deemed new lease runs until 31 August 2031 - therefore the aggregate duration is that 25 year period; and
2. the rent for the whole of the duration of that single deemed new lease shall be £200,000. No account is taken of the fact that the rent for the period from 1 September 2023 to 31 August 2031 is £300,000 because it is not looked at as a new lease commencing on 1 September 2023. Instead it is looked at as a single lease which commenced on 1 September 2006 - at the rent payable under both, but as the £300,000 is only payable from 1 September 2023, this is out with the first 5 years for the purposes of calculating the NPV of the deemed single new lease.

[Note: If the £200,000 rent increase variation had not taken place within the first 5 years of the original lease, but had instead e.g. taken place on 1 October 2008, then there would have been no deemed new lease related to the increase in rent - as the abnormal rent increase provisions do not apply to a lease which was under the stamp duty regime. Instead there would only have been the single deemed new lease relative to the extension of the term, at the new rent i.e. an 8 year lease, from 1 September 2023 to 31 August 2031 at a rent of £300,000.]