Guidance on SDLT Calculations for Leases with Variable or Uncertain Rent

SDLT on turnover leases and uncertain rent

Where lease rent depends on turnover, profit or other business results, the rent is uncertain when the lease is granted. For SDLT, you must file an initial return using a reasonable estimate of the rent for the first five years, keep evidence of how that estimate was made, and then update the position later when actual figures are available.

• Turnover or profit-linked rent is treated as variable and uncertain at the grant date, so SDLT cannot wait until the final rent is known.
• The initial SDLT return must use a reasonable estimate for any unknown rent in the first five years, supported by records such as business plans, accounts or trading forecasts.
• For years after year five, the NPV calculation uses the highest actual or estimated rent payable in any consecutive 12-month period during the first five years.
• Any possible rent increases after the first five years are ignored for this SDLT calculation.
• A further return is needed at the end of year five, or earlier if the lease ends sooner, and another return may be needed once the final rent figures for the first five years are known.
• If extra SDLT becomes due after revision, interest runs from the original filing date; for notifiable transactions, the initial filing deadline is 14 days from 1 March 2019, and was 30 days before that.

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SDLT on turnover leases: how to deal with uncertain rent

This page explains how Stamp Duty Land Tax (SDLT) works where lease rent depends on business performance, such as turnover or profit. These leases create a practical problem for SDLT because the rent is not fixed when the lease is granted. The official HMRC material explains that you must use estimates at first, and then revisit the calculation later when more is known.

What this rule is about

SDLT on leases is partly based on the net present value (NPV) of the rent. That calculation normally depends on knowing what rent is payable over the relevant period. A turnover lease does not give that certainty. If rent is linked to profits, turnover, or other business results, the amount payable will usually not be known at the grant date.

The source material treats this as a case of variable and uncertain rent. That matters because the legislation requires a reasonable estimate to be used where the rent is not known at the date of grant. The position then has to be revisited later.

What the official source says

HMRC’s manual says that where all or part of the rent under a lease is linked to business results, the rent is variable and will always be uncertain when the lease is granted. For the first five years, the NPV calculation must therefore use a reasonable estimate of the rent payable.

The manual also says:

• you do not necessarily need a professional valuation, but you should keep evidence showing how the estimate was reached;
• an initial SDLT return must be filed after grant using estimated rent where necessary;
• for years after the first five years, the NPV calculation uses the highest actual or estimated rent payable in any consecutive 12-month period during those first five years;
• potential rent increases after the five-year period are ignored for SDLT purposes;
• a further return is required at the end of year five, or at the end of the lease if earlier, with a revised NPV calculation;
• if the figures used at that stage are still not final, another return is required once the actual rent for the first five years is finally known.

The source also notes a timing change for the initial return: before 1 March 2019 the filing deadline was 30 days from grant; from 1 March 2019, if the transaction is notifiable, the deadline is 14 days.

What this means in practice

If a lease includes turnover rent, you cannot wait until the rent becomes certain before dealing with SDLT. You must file an initial return based on a reasonable estimate.

That estimate should cover each of the first five years of the lease, so far as the rent is not known at the outset. The estimate should be grounded in something real, such as expected trading figures, agreed business plans, past accounts, or other evidence available when the lease is granted. HMRC’s point is not that the estimate must be perfect. It must be reasonable and capable of explanation if later queried.

You then calculate the NPV using those estimated figures for the first five years. For the period after year five, you do not try to predict future turnover rent year by year. Instead, you take the highest rent payable in any consecutive 12-month period during the first five years, using actual or estimated figures as appropriate, and use that for the later years. Any possible post-five-year rent increases are ignored.

This is not the end of the SDLT position. Turnover leases often require later corrections because the true rent for the first five years may still be unknown at the five-year review point. HMRC therefore expects:

• a return at the end of year five, or earlier if the lease ends before then; and
• if that return still relies on estimates for some of the first five years, a further return once the final figures are known.

If the revised calculations show that more SDLT was due, interest runs from the filing date for the original transaction, not from the later correction date. If too much SDLT was paid, the manual says interest on the overpayment runs from the date the tax was originally paid.

How to analyse it

When dealing with a turnover lease, it helps to work through the issue in stages.

• First, identify whether any part of the rent depends on business results, such as turnover or profit. If it does, that part is variable and uncertain at grant.
• Second, decide what rent is actually known at the grant date and what must be estimated.
• Third, prepare a reasonable estimate for each of the first five years. Keep records showing the basis used.
• Fourth, identify the highest actual or estimated rent payable in any consecutive 12-month period during those first five years. That figure feeds into the NPV calculation for later years.
• Fifth, file the initial SDLT return on time.
• Sixth, diarise the end of year five, or the earlier lease end date, because a further return will be required.
• Seventh, if the year-five return still uses estimated figures because accounts are not yet final, monitor when the final rent figures become known and file the further revised return within 30 days.

The practical discipline here is record-keeping. The source material specifically says evidence of the basis of the estimate should be kept. That is important both for supporting the original filing and for explaining later adjustments.

Example

A retailer takes a 10-year lease. The rent includes a base amount plus an additional amount linked to shop turnover. At the grant date, the future turnover figures are not known, so the additional rent for each of the first five years has to be estimated using the business plan and available trading data.

An initial SDLT return is filed using those estimates. For years after year five, the NPV calculation uses the highest rent payable in any consecutive 12-month period within the first five years, based on the actual and estimated figures then available.

At the end of year five, the tenant files a further return. By that stage, the accounts for year five are still not final, so the revised calculation uses actual rent for years one to four and a revised estimate for year five. Once the year-five accounts are finalised and the actual rent is known, a further return must be filed within 30 days using the final figures.

Why this can be difficult in practice

The main difficulty is that turnover rent is often not final even by the time the five-year review point arrives. There may be delays in finalising accounts, disputes about turnover calculations, or adjustments under the lease. That creates a two-stage correction process: one return at year five and another when the figures are finally settled.

Another difficulty is deciding what counts as a reasonable estimate at the grant date. The manual does not prescribe a single method. That means the quality of the evidence matters. An estimate based on contemporaneous commercial material is easier to defend than one that appears speculative or unsupported.

There can also be practical confusion about the later-year assumption. The source material does not require you to project every future turnover fluctuation beyond year five. Instead, the calculation uses the highest rent in any consecutive 12-month period during the first five years. Missing that rule can lead to incorrect NPV calculations.

Finally, the filing deadlines differ depending on when the transaction took place. The source expressly notes that the initial filing deadline changed from 30 days to 14 days from 1 March 2019 for notifiable transactions. Older and newer transactions therefore need to be handled differently.

Key takeaways

• Turnover rent is treated as uncertain at the grant date, so SDLT must initially be calculated using a reasonable estimate.
• The lease must usually be revisited at the end of year five, and sometimes again when the final rent figures become known.
• Keep clear evidence of how the estimate was prepared, because the SDLT calculation may need to be justified and revised later.

This page was last updated on 24 March 2026

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

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