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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Miscellaneous provisions: Linked leases: Single scheme: Example

On 1 March 2005 a ten-year lease is granted for a house at a rent of £7,000 per annum. On 1 April 2005 following further negotiations, a second lease is granted for the neighbouring garage for a rent of £500 per annum. Both leases end on 28 February 2015. It is accepted that the leases are linked.

1. Calculate the tax that would be chargeable on the house if the linked transactions were a single transaction:

1. Calculate NPV of house (NPV1): £58,216
2. Aggregate with NPV of garage: £4,127 to give total NPV (TNPV) £62,343
3. Total tax that would be chargeable on house + £62,343 less threshold applicable as at 1 March 2005: £60,000

£2,343 @ 1% = £23.43

1. Calculate element of tax relating to house by applying fraction NPV1/TNPV

Tax £23.43 x 58216/62343= £21.86.

Deduct any tax already paid (nil) to arrive at tax due.

For notification purposes, effective date is 1 April 2005.

1. Calculate the tax that would be chargeable on the garage if the linked transactions were a single transaction:

1. Calculate NPV of garage (NPV2): £4,127
2. Aggregate with NPV of house: £58,216 to give total NPV (TNPV) £62,343
3. Total tax that would be chargeable on garage: £62,343 less threshold applicable as at 1 April 2005: £120,000

£NIL @ 1% = £NIL

1. Tax relating to garage itself must therefore be nil.

Taken separately, the NPV of these leases would each have been below the 0% threshold in force at the time of their respective grant. However the provisions of FA03/SCH5/PARA2 demand that they are aggregated for the purposes of applying the relevant thresholds fairly and proportionately, so that a charge does arise when they are considered together.