Example:
A 15 year lease with an annual rent of £50,000 was executed on 1 September 2014. An SDLT return was submitted and resultant tax paid.
On 1 September 2015, a minute of variation was executed to increase the rent from £50,000 to £75,000 per annum from the date of execution of the minute. This is treated as the grant of a new lease under Article 12 of The Land and Buildings Transaction Tax (Transitional Provisions) (Scotland) Order 2014.
The effective date will be the date the minute of variation was executed, 1 September 2015. An LBTT return is required by the filing date of 1 October 2015.
The chargeable consideration will be all of the additional rent payable in the remaining years of the lease. (If the rent had already been increased within the terms of the original lease, the additional rent is the difference between the rent established by the variation and the rent immediately before the variation is put into effect – sometimes called the ‘passing rent’.)
The net present value (NPV) is calculated using the additional £25,000 payable in each of the 14 remaining years. This results in a NPV of £273,013.01.
Using the rates and band for leases, the total tax chargeable would be:
(£150,000 x 0%)+(£123,013.01 x 1%) = £1,230.
The date of the first three yearly review will be the third anniversary of the effective date of the transaction, 1 September 2018. This return must be made to us by the filing date of 1 October 2018.
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