The effective date of a 10 year lease of a factory let for a rent of £500,000 per annum was 1 August 2015. The net present value (NPV) is calculated using the £500,000 payable in each of the 10 years.
An LBTT return was submitted and tax of £40,083 paid, based on the calculated NPV.
The tenant submits three-year review returns in 2018, 2021 and 2024. In January 2025, before the lease is due to come to an end, the parties agree to extend the term for a further five years at the same amount of rent.
The LBTT legislation does not require a further LBTT return to be submitted at the time of variation. Instead it should be reported on the next three year review return.
The date of this three-year review will be 1 August 2027, that being the day of the next triennial anniversary of the effective date of the lease. This return must be submitted no later than 31 August 2027.
The tenant must recalculate the NPV on the basis that the lease is now for a term of 15 years, using the actual rent payable for the first 12 years of the lease with the projected rent for the remaining term.
The recalculated NPV gives rise to tax of £56,087.
As £40,083 tax was paid in relation to the earlier LBTT returns, the further £16,004 tax arising as a result of the extension to the lease term must be paid at the same time as the latest review return is made on or before 31 August 2027.