Reviewing SDLT Calculations for Leases with Variable or Uncertain Rent

SDLT review for leases with uncertain rent after the first five years

Where SDLT on a lease was first worked out using estimated, contingent or uncertain rent, the calculation must be reviewed when the rent for the first five years becomes known, or at the end of year five if that happens later. The review may mean extra SDLT is due or that the tenant can claim a repayment.

• SDLT on lease rent is based on the net present value of the rent, so uncertain rent can require estimates in the original return.
• The calculation must be revisited at the end of the fifth year of the lease, or earlier if the first five years’ rent becomes ascertainable before then.
• The review uses the actual rent for the first five years and may also change the highest rent figure used to calculate SDLT for the rest of the term.
• If the revised figure is higher, the tenant must notify HMRC and pay the extra SDLT; if it is lower, the tenant may claim a refund.
• Interest on extra SDLT runs from 30 days after the original effective date, while any repayment interest runs from the date the tax was paid.
• The recalculation uses the SDLT rules, rates and thresholds that applied on the original effective date, and there is no further review under this rule after the five-year review has been completed.

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SDLT on leases with variable or uncertain rent: reviewing the estimate after the first five years

This page explains what happens when SDLT on a lease was originally calculated using estimated, contingent, or uncertain rent figures. The key point is that the original calculation may have to be revisited once the rent for the first five years becomes known. That review can lead either to more SDLT being payable or to a repayment claim.

What this rule is about

SDLT on the grant of a lease is charged partly by reference to the net present value, or NPV, of the rent over the term. That calculation can be difficult where the rent is not fixed from the start. Some leases include turnover rent, contingent rent, stepped rent that is not yet settled, or rent review outcomes that are not yet known.

In those cases, the original SDLT return may have to use estimated figures. The law then requires a later review so that the tax position can be corrected once the rent for the early part of the lease can be established more accurately.

This rule is specifically concerned with reviewing estimates used in the NPV calculation where the rent in the first five years was not known when the lease was first notified.

What the official source says

HMRC’s manual says that where the original NPV calculation included estimated or contingent rent, the calculation must be reviewed:

• at the end of the fifth year of the lease term, or
• earlier, if the rent payable in the first five years becomes ascertainable before then.

An earlier review might happen, for example, if a rent review affecting the first five years is agreed or determined before the fifth anniversary.

On that review, the calculation is redone by:

• recalculating the NPV for the first five years using the actual rent payable, not the earlier estimates or contingencies,
• recalculating any new highest rent for the period after the first five years, using the method applicable to later years,
• recalculating the NPV for the remainder of the term using that new highest rent, and
• arriving at a revised total NPV for the whole lease term.

If the revised total NPV is higher than the figure originally returned, the tenant must make a revised notification to HMRC and pay the extra SDLT. HMRC says this is done by letter to Stamp Taxes, and a fresh SDLT1 is not needed unless this is the first time the transaction has become notifiable. Where a transaction becomes notifiable for the first time on or after 1 March 2019, the return and payment are due within 14 days of the review date.

If the revised NPV is lower than the figure originally returned, the tenant may claim a repayment, again by writing to HMRC.

The manual also states that:

• interest on extra SDLT runs from 30 days after the original effective date of the transaction,
• interest on overpaid tax runs from the date the tax was originally paid, and
• the revised SDLT is worked out using the law as it applied at the original effective date, not by reference to later changes in rates, thresholds, lease term, or VAT treatment.

Once the fifth year has been reached and the review is done, there is no requirement to revisit the rent again after that five-year period for this purpose.

What this means in practice

If a lease started with uncertain rent, the original SDLT filing may only be provisional in effect. It is not enough to file once and forget about it. Someone needs to track whether the first five years’ rent has become known and whether that triggers a review.

The practical effect is that the tax can move in either direction:

• if actual rent turns out higher than estimated, extra SDLT may become due, with interest running from shortly after the original transaction date, not from the review date;
• if actual rent turns out lower than estimated, there may be an overpayment that can be reclaimed.

This can matter significantly on commercial leases where the rent was uncertain at completion, especially where turnover rent or unresolved rent review machinery affects the first five years.

It also matters that the recalculation is anchored to the original effective date. You do not apply later SDLT rate changes. You do not recalculate by reference to a later change in the lease term. And you do not adjust the historic SDLT position because the VAT treatment later changed.

How to analyse it

A sensible way to approach this issue is to ask the following questions.

• Did the original SDLT rent calculation include estimates, contingent rent, or figures that were not yet known?
• When did the rent payable in the first five years become ascertainable? Was it only at the end of year five, or did it become known earlier?
• What were the actual rents payable during the first five years?
• Using those actual figures, what is the corrected NPV for the first five years?
• Does that revised first-five-year position alter the highest rent figure to be used for the period after year five?
• Using that revised highest rent, what is the corrected NPV for the rest of the term?
• Does the revised total NPV exceed the amount originally returned, or is it lower?
• If more SDLT is due, has HMRC been notified within the required time from the review date?
• If too much SDLT was paid, has a repayment claim been made?

In practice, this means keeping the original SDLT computation, the lease, any rent review memorandum or determination, and a clear record of the actual rent payable in the first five years.

Example

Illustration: a tenant takes a lease under which part of the rent in the first five years depends on future turnover, so the original SDLT return uses estimated figures. In year 4, the parties agree figures that finally establish what rent was actually payable in years 1 to 4, and the remaining rent within the first five years is now also ascertainable under the lease terms.

At that point, the review is triggered. The tenant must recalculate the NPV for the first five years using the actual rent, then recalculate the later-years element using any revised highest rent required by the SDLT rules. If the total revised NPV is higher than originally returned, extra SDLT must be notified and paid within the required period from that review date. Interest on that extra tax is not measured from year 4; it runs from 30 days after the original effective date of the lease.

Why this can be difficult in practice

The main difficulty is often deciding when the rent for the first five years has become “ascertainable”. That is a factual and legal question. In some cases, the answer is obvious, such as when a rent review is formally determined. In others, it may be less clear, especially where rent depends on figures, certificates, accounts, or contractual machinery that develops over time.

Another difficulty is that the recalculation is not limited to substituting actual rent for estimated rent in the first five years. HMRC’s approach also requires a fresh look at the figure used for later years if the revised first-five-year rents alter the “highest rent” used in the NPV method for the remainder of the term.

There can also be a trap on interest. A tenant may assume that extra SDLT only becomes payable once the review happens, but the manual makes clear that interest on underpaid tax runs from 30 days after the original effective date. Delay can therefore become expensive even where the amount of rent was genuinely uncertain at the start.

Finally, the rule that there is no need to revisit after the five-year review is important, but it should not be overstated. It means there is no further review requirement under this particular first-five-years mechanism. It does not mean every later lease variation or later event is irrelevant for SDLT generally.

Key takeaways

• If lease rent was estimated or uncertain in the original SDLT calculation, the figures must be reviewed once the first five years’ rent becomes known, or at the end of year five if earlier certainty never arose.
• The review can increase or reduce SDLT, and any recalculation is made using the law and tax rates in force at the original effective date.
• If more SDLT is due, interest runs from 30 days after the original transaction date, so monitoring review dates matters.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Reviewing SDLT Calculations for Leases with Variable or Uncertain Rent

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