HMRC SDLT: Example of Stamp Duty Calculation for Lease with Variable Rent Increases

Stamp Duty Calculation for Variable Rent Lease

This example explains how to calculate the net present value (NPV) of a lease with variable rent. The lease, granted on 1 April 2018 for four years, has an initial rent of £100,000 per year, increasing by 4% annually. The NPV calculation considers these known rent increases, as they occur within the first five years and are not linked to the Retail Price Index (RPI).

  • The lease term is four years, starting from 1 April 2018.
  • Initial annual rent is set at £100,000.
  • Rent increases by 4% each year.
  • NPV is calculated using known rent figures for each year.
  • No review is needed as increases are predetermined and not contingent.

“`

Guidance Image

Calculating Stamp Duty for Variable Rent: Example 4

When assessing stamp duty for a lease with variable or uncertain rent, it is important to use the net present value (NPV) of the lease. This guide will explain how to carry out this calculation, using an example to clarify the process.

Understanding the Lease Terms

Let’s look at a specific case. A lease is granted for a duration of four years starting on 1 April 2018. The initial rent for the first year is set at £100,000 per year. This rent is expected to increase by 4% each subsequent year.

Calculating the Net Present Value (NPV)

The net present value (NPV) of the lease must be calculated based on certain conditions:

  • The rent increases need to be known at the time the lease is granted.
  • The rent increases must occur within the first five years of the lease term.
  • The increases should not be based on the Retail Price Index (RPI).

In this example, we are able to provide the yearly figures for rent, which will be used to calculate the NPV:

Yearly Rent Breakdown

The expected rent for each year of the lease is as follows:

  • Year 1: £100,000
  • Year 2: £104,000
  • Year 3: £108,160
  • Year 4: £112,486

Using Fixed Increases for NPV Calculation

In this scenario, the NPV calculation does not require adjustments or re-evaluations. This is because the future rent increases have already been determined and are included in the initial NPV calculation. These amounts are not speculative, nor are they based on conditions that may change.

Conclusion of Example Calculation

It is essential to ensure that the NPV reflects only those rent increases that are predetermined and certain. This approach simplifies the calculation process and ensures compliance with the stamp duty requirements.

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

View all HMRC SDLT Guidance Pages Here

Search Land Tax Advice with Google Site Search

Nick Garner - Land Tax Expert

Stamp Duty Issues? I Solve Them.

Hi, I’m Nick Garner. If your conveyancer is unsure, or if HMRC is asking questions, don’t panic. I handle the complex cases that standard solicitors often can’t.

❓ Start Here: Free Informal Opinion

Got a question? Don’t guess. Email me your case details for a free initial assessment of your liability position.

✉️ Email: [email protected]

Buying Now?

Indemnified Advice

If your transaction is complex (Mixed Use, Uninhabitable, Multiple Dwellings), your conveyancer may be hesitant. I provide the legal backing they need.

  • ✓Solution 1: Indemnified Advice
    Formal letters to satisfy your conveyancer.
  • ✓Solution 2: Compass SDLT Submission
    We act as Tax Agent to submit the return.

Already Paid?

SDLT Reclaims & Refunds

Overpaid on SDLT, LTT, or LBTT? I handle the entire process to get your money back.

  • • Uninhabitable Property Claims
  • • Mixed Use Claims
  • • Property Trader Relief
NO WIN, NO FEE.
You receive the refund, then pay me.

HMRC Enquiry Defence & Professional Indemnity

My advisory work is covered by a professional indemnity insurance policy issued by Markel International Insurance Company Limited (up to £250,000 per claim). This protects you and ensures your position is legally documented.

Urgent Enquiry? Call me directly.

📞 0204 577 3323

[email protected]