SDLTM13245 - Calculation of stamp duty: Rent: Variable or uncertain rent: Example 10
A trader is granted a lease for
- a term of ten years from and including 1 January 2013
- rent based on either 5% of turnover or £30,000, whichever is higher.
»Ê¹ÚÌåÓýappre are no provisions in the lease for review of the basis on which turnover rent is calculated.
On grant
A land transaction return should be filed by 31 January 2013.
As the rent is uncertain because it is based on turnover, the tenant makes a reasonable estimate of the rents payable in respect of the first five years of the lease by virtue of FA03/S51 as follows. »Ê¹ÚÌåÓýapp increase is because the business plan shows turnover to increase such that rent estimates of £35,000 would be reasonable after year 3..
| Year | Rent estimate |
|---|---|
| Year 1 | £30,000 |
| Year 2 | £30,000 |
| Year 3 | £30,000 |
| Year 4 | £35,000 |
| Year 5 | £35,000 |
»Ê¹ÚÌåÓýapp highest rent payable in respect of any consecutive twelve-month period is calculated as being £35,000.
As there is a minimum rent payment due, this minimum rent is ascertainable for the purposes of calculating the average annual rent. This is £30,000 per year.
»Ê¹ÚÌåÓýapp net present value (NPV) of the estimated rent is £277,073. Stamp duty land tax (SDLT) is calculated as:
- £1,270 payable on the rent plus
At the end of five years
Estimates should be reconsidered and a return filed as necessary by way of letter to Stamp Taxes, by 31 January 2018. At this point, the rent paid in respect of the first four years has been determined but the rent for the fifth year has not.
»Ê¹ÚÌåÓýapp agreed rents are:
| Year | Agreed rents |
|---|---|
| Year 1 | £30,000 |
| Year 2 | £32,000 |
| Year 3 | £30,000 |
| Year 4 | £38,000 |
A revised estimate of the rent in respect of year five is made in the sum of £42,000. »Ê¹ÚÌåÓýapp highest rent payable in any consecutive twelve-month period is also estimated to be £42,000
»Ê¹ÚÌåÓýapp NPV of the estimated rent is £293,142. SDLT is calculated as:
- £1,431 payable on the rent plus
Hence additional tax of £161 is due.
On determination of the estimated rent for fifth year
»Ê¹ÚÌåÓýapp rent for the fifth year is determined on 1 June 2018, in the sum of £40,000. »Ê¹ÚÌåÓýapp revised NPV is £289,831. SDLT is calculated as:
- £1,398 payable on the rent plus
A refund of £33 may be claimed.
A return does not have to be filed as a refund is due. If a refund is required, this should be claimed by way of amended return by letter to the Stamp Office.