HMRC SDLT: SDLTM13105 – Calculation of stamp duty land tax: Rent: Rate thresholds: Examples

Stamp Duty Land Tax Calculation Principles

This section of the HMRC internal manual provides examples of calculating Stamp Duty Land Tax (SDLT) on rent, focusing on rate thresholds. It outlines key principles and concepts for accurate tax computation.

• Explains the calculation of SDLT on rental income.
• Details rate thresholds applicable to different rent levels.
• Provides examples to illustrate the application of these thresholds.
• Aims to ensure compliance with tax regulations.
• Serves as a guide for HMRC staff in tax assessment processes.

Calculation of Stamp Duty Land Tax: Rent and Rate Thresholds

Understanding Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) is a tax that applies to the rental value of leases when a property is rented in the UK. The amount of SDLT due depends on whether the agreed rental amount is above or below certain thresholds.

When a lease is granted, it’s essential to calculate the net present value (NPV) of the rent. This value helps determine if SDLT is applicable and, if so, how much tax is owed.

Key Concepts

– Net Present Value (NPV): This is the current value of a series of future rental payments, calculated to reflect the value today.

– Residential Threshold: For residential properties, the SDLT does not apply if the NPV of the rent is less than £125,000.

– Non-Residential Threshold: For non-residential properties, the threshold is £150,000.

– Tax Rate: If the NPV of the rent exceeds the threshold, a tax rate of 1% applies to the amount above the threshold.

– Linked Transactions: If transactions involve the same landlord and tenant and are part of a single agreement or series of deals, the total rental value is combined for SDLT calculation.

Examples of SDLT Calculation

Example 1: Residential Lease Below Threshold

A lease for a residential property starts on 1 June 2018 with a net present value of rent at £35,350.

– NPV of Rent: £35,350
– Residential Threshold: £125,000
– Result: Since £35,350 is below the threshold, the SDLT rate is 0%. Therefore, no SDLT is due.

For detailed instructions about notifying situations when no SDLT is owed, see SDLTM12010.

Example 2: Residential Lease Above Threshold

Consider a residential lease starting on 1 June 2018 with an NPV of rent amounting to £145,350.

– NPV of Rent: £145,350
– Residential Threshold: £125,000
– Calculation: The amount that exceeds the threshold is £145,350 – £125,000 = £20,350.
– SDLT Due: 1% of £20,350 = £203.50.

Example 3: Non-Residential Lease Below Threshold

Imagine a lease on a shop starting on 31 March 2018, with an NPV of the rent being £135,350.

– NPV of Rent: £135,350
– Non-Residential Threshold: £150,000
– Result: Since £135,350 is below the non-residential threshold, the SDLT rate is 0%, and no SDLT is owed.

For detailed instructions about notifying situations when no SDLT is owed, see SDLTM12010.

Example 4: Non-Residential Lease Above Threshold

In a different case, consider a shop lease starting on 31 March 2018, where the NPV of rent is £165,350.

– NPV of Rent: £165,350
– Non-Residential Threshold: £150,000
– Calculation: The excess is £165,350 – £150,000 = £15,350.
– SDLT Due: 1% of £15,350 = £153.50.

Example 5: Linked Transactions for Non-Residential Leases

In another scenario, a shop lease begins on 31 March 2018 with an NPV of £135,350. In addition, the tenant leases a storage facility costing £15,650.

– Lease 1 (Shop): £135,350
– Lease 2 (Storage): £15,650
– Total NPV: £135,350 + £15,650 = £151,000
– Non-Residential Threshold: £150,000
– Result: Since £151,000 exceeds the threshold, the excess is £151,000 – £150,000 = £1,000.
– SDLT Due: 1% of £1,000 = £10.

Example 6: Mixed Use Leases

Now imagine a shop lease starting on 31 March 2018, with an NPV of the rent being £125,350. Alongside, the tenant also leases a flat above the shop for an NPV of £15,650.

– Lease 1 (Shop): £125,350 (Non-Residential)
– Lease 2 (Flat): £15,650 (Residential)
– Total NPV: £125,350 + £15,650 = £141,000
– Non-Residential Threshold: £150,000
– Result: Since £141,000 is below the threshold, the SDLT rate is 0%, and no SDLT is owed for these linked transactions.

For detailed instructions about notifying situations when no SDLT is owed, see SDLTM12010.

Considerations When Calculating SDLT

– Ensure all rental values are correctly assessed and reported.
– Understand whether transactions are linked and should be aggregated for calculations.
– Be aware of the different thresholds for residential and non-residential properties.
– Regularly check any updates or changes to SDLT rates or thresholds, as they can affect calculations.

It’s beneficial to maintain records of rental agreements and calculations to support any SDLT submissions to HMRC.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM13105 – Calculation of stamp duty land tax: Rent: Rate thresholds: Examples

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