Example of Stamp Duty Calculation for Lease with Variable Turnover-Based Rent

SDLT on leases with turnover rent and a minimum rent

Where a lease rent depends on turnover but also includes a fixed minimum rent, SDLT on the rent cannot always be finalised when the lease starts. The tenant must file the initial return on time using a reasonable estimate of the first five years’ rent, review the figures after five years using actual rents where known, and then adjust again if a later final figure changes the tax. If too much SDLT is paid, a refund may be claimed.

• Turnover rent is treated as uncertain for SDLT, so the tenant must estimate the rent for the first five years when the lease is granted.
• If the lease includes a minimum rent, that minimum is still treated as ascertainable even though the total rent may be higher.
• After five years, the tenant must revisit the calculation, replacing estimates with actual figures where available and re-estimating any unresolved year.
• If the revised figures increase the net present value of the rent, extra SDLT becomes payable.
• If a later final rent figure reduces the SDLT, no further return is needed just for that refund, but the refund must be claimed from HMRC in the proper way.

Scroll down for the full analysis.

SDLT on a lease with turnover rent and a minimum rent: how the estimate and five-year review work

This page explains how SDLT is worked out when a lease rent is not fixed because it depends on turnover, but the lease also contains a minimum annual rent. The official example shows three stages: the position when the lease is granted, the compulsory review after five years, and the later correction when the final rent for year 5 becomes known. The point matters because SDLT on rent is not always final on day one. Where rent is variable or uncertain, the tenant may need to estimate it, revisit that estimate later, and pay more tax or claim a refund.

What this rule is about

SDLT on leases is charged partly by reference to the rent. Where rent is uncertain at the start of the lease, the tenant cannot always calculate the final SDLT figure immediately. In that situation, the legislation requires a reasonable estimate of the rent for the first five years.

This example deals with a common commercial pattern: rent is the higher of a fixed minimum amount and a percentage of turnover. That means there is always at least a known minimum rent, but the actual rent may be higher if the business performs well.

The example also shows an important distinction:

• the actual rent is uncertain because it depends on future turnover;
• the minimum rent is nevertheless ascertainable from the lease; and
• the SDLT position may need to be revisited once actual figures become known.

What the official source says

In the example, a 10-year lease begins on 1 January 2013. The rent is the higher of 5% of turnover and £30,000. There is no rent review clause changing the basis on which turnover rent is calculated.

On grant of the lease, the tenant must file an SDLT return by 31 January 2013. Because the rent is uncertain, the tenant makes a reasonable estimate of the rents payable for the first five years. The estimates used are:

• Year 1: £30,000
• Year 2: £30,000
• Year 3: £30,000
• Year 4: £35,000
• Year 5: £35,000

The official source says the highest rent payable in any consecutive 12-month period is estimated to be £35,000. It also says that, because the lease requires a minimum rent, that minimum rent is ascertainable for the purpose of calculating the average annual rent, and is £30,000 per year.

Using the estimated rents, the net present value of the rent is £277,073, producing SDLT of £1,270 on the rent.

At the end of five years, the estimates must be reconsidered and a further return made if necessary, by 31 January 2018. By then, the actual rents for the first four years are known, but year 5 is still not finally determined. The actual rents are:

• Year 1: £30,000
• Year 2: £32,000
• Year 3: £30,000
• Year 4: £38,000

A revised estimate for year 5 is made at £42,000, and the highest rent in any consecutive 12-month period is also estimated at £42,000. The revised NPV is £293,142, producing SDLT of £1,431 on the rent. That means an additional £161 is due.

Later, on 1 June 2018, the year 5 rent is finally determined at £40,000. The revised NPV becomes £289,831, producing SDLT of £1,398 on the rent. That is £33 less than the amount paid after the five-year review. The official source says no further return is required where this later correction produces a refund, but the refund may be claimed by amendment by letter to the Stamp Office.

What this means in practice

The practical message is that a turnover rent lease can create a moving SDLT position.

At the start, you do not wait until the turnover figures are known. You file on time using a reasonable estimate for the first five years. That estimate must be grounded in the facts available at the time, such as the business plan.

If the lease also contains a minimum rent, that minimum matters. Even though the total rent is uncertain, the minimum payment is fixed by the lease and can therefore be used as an ascertainable amount for the average annual rent calculation referred to in the example.

After five years, you must revisit the figures. By then, some years will be known exactly and any remaining uncertain year or years must be re-estimated. If the revised figures increase the SDLT, extra tax becomes payable.

If a later final determination shows that too much SDLT has been paid, the example indicates that a refund can be claimed. The official source specifically says that no return has to be filed if the later adjustment only results in a refund, but the refund must be claimed by amendment in the way stated.

How to analyse it

For a lease of this kind, a sensible way to analyse the SDLT position is:

• Identify whether the rent is fixed, variable, or uncertain. A turnover rent is uncertain because it depends on future trading.
• Check whether the lease contains a minimum rent. If it does, that minimum may still be ascertainable even though the total rent is not.
• At the effective date of the transaction, prepare a reasonable estimate of the rent for the first five years. The estimate should reflect the evidence available at that time.
• Calculate the NPV using those estimated rents.
• File the initial SDLT return by the normal deadline.
• At the end of five years, replace estimates with actual figures where known, and re-estimate any year that is still unresolved.
• Recalculate the NPV and SDLT. If more tax is due, account for it.
• If a later final figure reduces the SDLT, consider whether a refund claim is available in the manner described by the official source.

In practice, the key evidential question is whether the original estimate was reasonable when made. The example refers to the business plan as the reason why rent of £35,000 from year 4 onwards was considered reasonable at the outset.

Example

Illustration: a retailer takes a 10-year lease. The rent is the higher of £30,000 a year or 5% of turnover. At the start, the retailer expects modest sales for the first three years and stronger trading after that. It files its SDLT return using estimated rents of £30,000, £30,000, £30,000, £35,000 and £35,000 for years 1 to 5.

Five years later, actual trading was better than expected in years 2 and 4, and year 5 is still being finalised. The tenant therefore replaces the earlier estimates with actual rents for years 1 to 4 and a revised estimate for year 5. That increases the NPV and creates extra SDLT. When the year 5 figure is later finalised at a lower amount than the revised estimate, the SDLT falls slightly and a refund can be claimed.

This shows that the SDLT liability on rent can change more than once before the correct figure is settled.

Why this can be difficult in practice

The main difficulty is that the SDLT system requires a tax calculation before the rent is known with certainty. That creates several practical issues.

• Reasonableness of estimates: the source says the tenant must make a reasonable estimate. That is fact-sensitive. An estimate should be based on evidence available at the time, not hindsight.
• Partial certainty: by the five-year review point, some years may be known and others not. The calculation then becomes a mixture of actual figures and revised estimates.
• Interaction with minimum rent: a lease may contain both a fixed minimum and a variable turnover element. The example shows that the minimum can still be treated as ascertainable for part of the SDLT analysis, even though the overall rent remains uncertain.
• Administrative steps: the official source refers to filing or amending by letter to HMRC. Readers should be careful to distinguish between the substantive tax rule and the administrative process described in the source, particularly if HMRC processes have changed over time.

Another point to watch is that this example is only about the rent element of SDLT on a lease. The source repeatedly says “plus”, which indicates that any tax due on chargeable consideration other than rent would need to be considered separately if relevant.

Key takeaways

• A turnover rent lease usually involves uncertain rent for SDLT purposes, so the tenant must use a reasonable estimate for the first five years.
• If the lease contains a minimum rent, that minimum may still be treated as ascertainable even though the total rent can rise above it.
• The SDLT position does not necessarily end on grant: it may need to be recalculated after five years and again when any remaining uncertain rent is finally determined.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example of Stamp Duty Calculation for Lease with Variable Turnover-Based Rent

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