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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs and exemptions: Overlap relief: Example 5

A lease is granted on 1 April 2004 for 25 years (the old lease)

* the date of expiry is 31 March 2009
* initial rent of £144,000 per annum is payable under this old lease
* the lease contains a provision for a rent review to higher of market rent or passing rent with effect from 1 April 2009 and every fifth anniversary thereafter

The old lease is surrendered and a new lease is granted on 1 April 2008 for 150 years

* rent of £110,000 per annum is payable under this new lease
* there is no provision for rent reviews

1. As the rent review is after five years, it is ignored (see SDLTM13160). The net present value (NPV) of the old lease is £2,373,337
2. The overlap period is from 1 April 2008 until 31 March 2029, that is, 21 years
3. The rent payable under the new lease is £110,000
4. The rent payable under the old lease is £144,000. This is the amount included in the first NPV calculation
5. The new lease is not a lease with variable rent and so FA03/SCH17A/PARA7 is not in point. The NPV calculation should use rent of £0 for years 1 to 21 inclusive (as the old rent is more than the new rent but the figure to be included in the calculation cannot be less than £0) and rent of £110,000 for years 22 to 150 inclusive to give NPV of £1,508,038 and stamp duty land tax due of £13,580.
6. The calculator will not cope with this calculation and it should be performed manually.