Beyond the call of duty

Andrew Noble
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My company took a 15-year lease in December 2003 and paid Stamp Duty Land Tax (SDLT). Will it have to pay further SDLT after the first five years?

Stamp Duty Land Tax (SDLT) marks its fifth birthday on 1 December and the anniversary brings into focus two parts of the SDLT rules that apply to leases. 

First, if the exact amount of rent you paid in the first five years could not be accurately calculated up front, for example because it depended on the business’s turnover, or was subject to a rent review that was not for a fixed amount, the SDLT you paid at the start of the lease would have been based on a reasonable estimate of the first five years’ rent.

So at the end of the first five years of the lease, or once you know the actual amount of the rent due in those first five years, the company will need to compare the actual rent paid or payable with the estimate it made at the time the lease was granted.

If it under-estimated the rent at the time, it will probably have to pay more SDLT. If it over-estimated, the company could claim a refund from Revenue and Customs. Interest may also be payable or claimed, but note, the rates will be higher if payable to the Revenue.

Second, if you have a rent review after more than five years from the start of the lease, you will need to check at the time if it leads to an ‘abnormal’ rent increase. An abnormal increase is roughly equivalent to an annual increase of more than 20%, but the precise formula in the legislation should be checked.

If you are affected by these new measures you will have 30 days to submit any further returns and payments. Any delay may result in significant penalty and interest charges, so you should review the original SDLT payments to see if any further action is required.


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