The rules surrounding Stamp Duty Land Tax (“SDLT”) are as complicated as the calculations and it is easy to be caught out. This is especially the case when an event triggering the payment of SDLT occurs a long time after the transaction has completed. An example of such a “trigger” would be a rent review within the first 5 years of the lease.

When a lease is completed (and subject to the SDLT threshold) SDLT will be payable and calculated using the rental amounts in the first five years and the “net present value” formula over the term of the lease. The rent in the first 5 years is used to calculate the SDLT liability and the highest rental figure in that 5 year period is taken to be the rent for the rest of the term of the lease. If a rent review occurs within the first five years this will be accounted for in the net present value calculation. A reasonable estimate of the revised rent will be made and this will be assumed to be the rent payable in the following years until the next review and so forth. The SDLT will then be paid and an SDLT return form submitted to HMRC by the tenant.

However, when the time comes to carry out the rent review and the new rent is determined it may be the case that the actual rent differs from the estimate made on day one of the lease. When this happens, HMRC requires tenants to submit a further SDLT return form. This may mean a further payment of SDLT is due along with interest to HMRC. On the other hand SDLT may be due back to the tenant and this can be reclaimed together with interest.


  • If you have (or have had) a rent review, check to see if this affects your SDLT liability and avoid a surprise letter from HMRC.
  • Don’t be caught out by rent reviews which occur after 5 years and which have determined an “abnormal rent increase”. There are HMRC rules surrounding such scenarios as well. For example, if the rent has been kept low for the initial 5 years (attracting lower SDLT liability) and then “abnormally” increased, HMRC will treat this as a new lease and SDLT will be due within 30 days of the increase.

If you would like advice on any aspect of Stamp Duty Land Tax, whether for commercial or residential property, please give us a call on 0116 289 7000.

Raj Hundal, Trainee Solicitor

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