Stamp duty on turnover rent: HMRC’s ten-year lease example
Turnover rent and stamp duty
HMRC’s historic example shows that uncertain lease rent is estimated at first, then checked when the early years become known.
- Estimate the first five years reasonably.
- Use the highest early-year rent for later years.
- A later review can mean extra tax or a repayment.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on turnover rent: a ten-year lease example
When lease rent depends on business turnover, the final figure may be unknown when you sign, yet stamp duty land tax must still be calculated. HMRC’s example uses an estimate first and checks it once the early years’ rent is known.
What this rule is about
This concerns a commercial lease with turnover rent. Under the clause, the tenant pays whichever is higher: 5% of turnover or £30,000 a year. Because future turnover is unknown, the rent is uncertain when the lease starts.
For stamp duty on lease rent, the calculation uses a discounted total that brings future rent payments into one tax figure, called net present value or NPV. That is the basic idea.
Rather than waiting until every year’s turnover is known, the law requires a reasonable estimate for the first five years. An estimate is needed first.
What the official source says
A historic example in HMRC’s manual concerns a ten-year lease starting on 1 January 2013. It says the lease contained no clause for reviewing how turnover rent was calculated.
- For each of years one to three, the tenant estimated rent at £30,000.
- For years four and five, the estimate rose to £35,000.
- A business plan showing higher expected turnover explained the increase.
- Accordingly, £35,000 was the highest rent in any twelve-month period in those five years.
- The known guaranteed minimum rent was £30,000 a year.
- The estimated NPV was £277,073.
- On the rent, HMRC’s example calculates SDLT at £1,270.
For rent after the fifth year, legislation takes the highest rent from any consecutive twelve-month period within the first five years, even if that amount was initially an estimate. In this example, it was initially £35,000.
Five years later, HMRC’s manual says that estimate should be reconsidered. By then, rent for years one to four had been agreed. Year five’s rent was still not final.
- For year one, the agreed rent was £30,000.
- For year two, the agreed rent was £32,000.
- For year three, the agreed rent was £30,000.
- For year four, the agreed rent was £38,000.
- For year five, the revised estimate was £42,000.
- The revised NPV was £293,142, producing SDLT of £1,431.
- In the example, this meant an extra £161 was due.
What this means in practice
A turnover-rent clause does not allow you to ignore stamp duty until the rent is final, because you must begin with a sensible estimate based on what was known at the time. Start there.
Keep checking the first five years as well. A higher actual rent can increase the figure used for later years of the lease. A lower figure can reduce it.
- Keep the forecast used when the lease began.
- Keep annual turnover figures and rent calculations.
- Record when each year’s rent became fixed.
- Compare the final early-years rent with the estimate used on the original return.
What people often miss is that the highest early-year rent can determine the assumed rent for every later year, even where that high figure arose in only one unusual year. Its effect can extend well beyond that year.
How to analyse it
Begin with the wording of the lease rather than the label attached to the rent, because a payment may remain uncertain when it depends on future turnover even if the lease guarantees a minimum payment. Labels do not decide it.
- Check the lease term and the date it began.
- Identify each part of the rent that can vary.
- Identify any minimum amount that must be paid.
- Make a reasonable estimate of rent for the first five years.
- Find the highest rent for any consecutive twelve-month period in those years.
- Use that figure when working out rent for later years.
- When the early rent becomes known, recalculate the position.
- Check whether the revised calculation means more tax or less tax.
For a historic return, the date matters too: HMRC’s example says a return was due by 31 January 2013 and the five-year review was due by 31 January 2018. Those dates belong to this example. They are not current filing advice.
Example
In HMRC’s example, the tenant initially expected a peak rent of £35,000 during the first five years. This produced an NPV of £277,073 and SDLT of £1,270 on the rent.
At the five-year point, the actual and revised figures showed a higher peak of £42,000. The NPV rose to £293,142. SDLT rose to £1,431, so £161 more was due.
Later, year five’s rent was fixed at £40,000 rather than £42,000. The NPV then fell to £289,831 and SDLT fell to £1,398. That left a £33 repayment.
Why this can be difficult in practice
Estimating future turnover is not an exact science, although the estimate must still be reasonable when it is made and may later prove wrong without having been unreasonable at the start. Reasonableness is judged then.
You might think that only year five’s final rent matters. It does not. Earlier years’ agreed rents also feed into the calculation.
- A business plan may support an estimate, but it should match the facts known at the time.
- Rent invoices may not show clearly when the amount became final.
- A minimum-rent clause and a turnover clause must both be read together.
- The manual’s instruction to write to HMRC reflects its historic administrative guidance, not a general current process.
- A repayment route can depend on timing and the form of the original return.
Key takeaways
- Use a reasonable estimate where early turnover rent is unknown.
- Highest rent in the first five years can set the later-years figure.
- Revisit the calculation when the first five years’ rent becomes known.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 51 — reasonable estimates for uncertain amounts paid under a transaction
- FA 2003 section 56 — stamp duty calculation where a lease includes rent
- FA 2003 Schedule 5 para 2 — tax on rent using its net present value
- FA 2003 Schedule 5 para 3 — formula for calculating rent’s net present value
- FA 2003 Schedule 17A para 7 — treatment of variable or uncertain rent in leases
- FA 2003 Schedule 17A para 8 — later adjustment when uncertain lease rent becomes known
- FA 2003 Schedule 10 para 6 — amending a land transaction return after filing
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The source does not explain every input behind the net present value figures.
- The source does not say whether any separate premium or other payment was involved.
- Current filing and repayment procedures should be checked separately for a modern transaction.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- the signed lease and any side agreements
- the clause setting the turnover-rent calculation
- the guaranteed minimum-rent clause
- the original SDLT return and payment record
- turnover records and rent demands for each relevant year
- the business plan or other basis for the original estimate
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty on turnover rent: HMRC's ten-year lease example [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 51 - reasonable estimates for uncertain amounts paid under a transaction https://www.legislation.gov.uk/ukpga/2003/14/section/51/2025-11-17 - FA 2003 section 56 - stamp duty calculation where a lease includes rent https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - tax on rent using its net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - formula for calculating rent's net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 7 - treatment of variable or uncertain rent in leases https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 8 - later adjustment when uncertain lease rent becomes known https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/8/2025-11-17 - FA 2003 Schedule 10 para 6 - amending a land transaction return after filing https://www.legislation.gov.uk/ukpga/2003/14/schedule/10/paragraph/6/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm13245 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The source does not explain every input behind the net present value figures. - The source does not say whether any separate premium or other payment was involved. - Current filing and repayment procedures should be checked separately for a modern transaction. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty on turnover rent: HMRC’s ten-year lease example
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