Calculation of Stamp Duty Land Tax for Turnover Leases

SDLT treatment of turnover leases and variable rent

Where lease rent depends on turnover or another figure that is not known when the lease is granted, it is treated as variable or uncertain rent for SDLT purposes. This means the lease cannot usually be taxed as if all rent were fixed from the outset, and the SDLT position may need to be reviewed later depending on the lease terms and actual rent payable.

• Turnover leases are a common example of leases with variable or uncertain rent, because part or all of the rent depends on future business performance.
• For SDLT on the grant of a lease, you need to identify whether the rent is fixed, variable, or a mixture of both, such as a base rent plus a turnover top-up.
• The tax treatment depends on the real wording and effect of the rent clause, not simply on labels such as “turnover rent” or “additional rent”.
• You should check what counts as rent for SDLT, whether any minimum rent, cap, or threshold affects the analysis, and whether later events could change the SDLT position.
• The guidance is archived, and from April 2015 Scottish land transactions generally fall under LBTT instead of SDLT, so timing and location matter.

Scroll down for the full analysis.

SDLT and turnover leases: how variable rent is treated

This page is about leases where the rent is not fixed, but depends on the tenant’s turnover or some other uncertain figure. In SDLT terms, that matters because tax on the grant of a lease can depend on the rent payable over the term. Where the rent is variable or uncertain, special calculation rules apply.

What this rule is about

A turnover lease is usually a lease where some or all of the rent depends on the tenant’s business turnover at the property. For example, rent might be a percentage of shop takings, or a base rent plus an additional amount linked to sales.

For SDLT, rent under a lease is not always straightforward to measure at the start. If the amount cannot be known with certainty when the lease is granted, the legislation treats it as variable or uncertain rent. The tax calculation then has to work with that uncertainty rather than ignore it.

This matters because SDLT on leases is charged by reference to the rent over the term, using the statutory calculation method. If the rent figure is only provisional at the outset, the SDLT position may also be provisional and may need to be revisited later.

What the official source says

The official source identifies turnover leases as an example of leases with variable or uncertain rent. In other words, where rent depends on turnover, it is not treated as a fixed rent known from day one.

The source sits within HMRC’s guidance on calculating SDLT where rent is variable or uncertain. Its practical point is that turnover-based rent falls within those rules rather than the simpler rules for a lease with a fixed rental stream.

The source also notes that the page is archived and that, from April 2015, SDLT no longer applies to land transactions in Scotland. Scottish transactions from that point are within LBTT instead. The archived page therefore remains relevant mainly for SDLT transactions outside Scotland, and for historical SDLT analysis where timing matters.

What this means in practice

If a lease includes turnover rent, you should not assume the SDLT can be calculated as though the rent were fixed at a known annual amount. The turnover element is inherently uncertain at the grant date unless the lease terms somehow make the amount certain.

In practice, that means the person preparing the SDLT return needs to identify:

• whether the rent is wholly fixed, wholly variable, or a mix of both
• whether any turnover element is additional rent under the lease
• what the SDLT rules require where the rent cannot yet be known
• whether later events may require the SDLT position to be revisited

A common practical feature is a lease with a fixed base rent plus a turnover top-up. In that situation, the fixed part and the uncertain part may need to be analysed separately within the SDLT framework for lease rent.

The key point is not the label used in the lease. Calling something “turnover rent”, “additional rent”, or “contingent rent” does not decide the tax treatment by itself. What matters is whether the amount payable is in fact uncertain or variable when the lease is granted.

How to analyse it

A sensible way to approach a turnover lease is to ask the following questions.

• Is there a lease for SDLT purposes, and is SDLT the relevant regime? For post-April 2015 Scottish transactions, the answer may be no because LBTT applies instead.
• What amounts count as rent under the lease terms?
• Is any part of that rent linked to turnover, profit, receipts, or another figure that is not known at the effective date?
• Is there a guaranteed minimum rent, a fixed base rent, or a cap that affects what is certain and what is uncertain?
• Does the SDLT calculation therefore need to use the rules for variable or uncertain rent rather than treating the whole rent stream as fixed?
• Could later information about actual rent trigger a need to revisit the SDLT treatment under the wider lease-rent rules?

This analysis is important because the SDLT treatment depends on the legal and commercial mechanics of the rent clause. A short summary in heads of terms may miss points that matter, such as whether the tenant must pay the higher of a minimum rent and a turnover rent, or whether the turnover sum is only payable after a threshold is reached.

Example

Illustration: a retail tenant takes a 10-year lease. The lease provides for a fixed annual base rent and an additional payment equal to a percentage of annual store turnover above a stated threshold. At the date the lease is granted, nobody can know what the turnover payment will be in future years. The turnover element is therefore an uncertain or variable rent element for SDLT purposes, and the lease should be analysed under the SDLT rules that deal with uncertain rent rather than as a lease with wholly fixed rent.

Why this can be difficult in practice

The source material is brief, but the underlying issue can be fact-sensitive.

First, lease drafting varies. Some clauses produce genuinely uncertain rent. Others set a minimum sum, a maximum sum, or a formula that partly fixes the rent. The SDLT analysis depends on the actual legal obligation, not on the commercial shorthand used by the parties.

Second, turnover leases often combine several payment mechanisms. A lease may have base rent, turnover rent, service charge, insurance rent, and other sums. Not every payment under a lease is necessarily treated in the same way for SDLT. Care is needed to identify what is rent for SDLT purposes and what is not.

Third, the archived nature of the source matters. It points to an SDLT concept, but readers must be careful about territorial scope and timing. Scotland moved to LBTT from April 2015, so the correct tax code depends on when and where the transaction took place.

Finally, uncertainty at the grant date can create later compliance questions. Where rent is not known at the outset, the initial SDLT treatment may not be the end of the story. The wider SDLT rules on variable or uncertain rent need to be considered in full.

Key takeaways

• A turnover lease is treated as involving variable or uncertain rent for SDLT purposes.
• You should not assume turnover-based rent can be handled as though it were fixed from the start.
• The correct analysis depends on the lease wording, the timing of the transaction, and whether SDLT or another land transaction tax regime applies.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Calculation of Stamp Duty Land Tax for Turnover Leases

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