Transitional lease – variation to increase rent and term where original effective date of lease is over 5 years ago


A ten year lease with an annual rent of £100,000 was executed on 1 May 2009. An SDLT return was submitted and resultant tax paid.

On 1 May 2015, a minute of variation was executed to extend the lease for a further 10 years and increase the annual rent by £20,000 with immediate effect.

This is to be treated as the grant of a new lease under Article 13 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 May 2015. An LBTT return is required by the filing date of 31 May 2015.

The chargeable consideration will be all of the rent payable from the beginning of the additional term only. That is, £120,000 per annum from 2019 till 2029.

The Net Present Value (NPV) is calculated using the £120,000 payable in each of the ten years extended. This results in a NPV of £997,992.64.

Using the rates and bands for leases, the total tax chargeable would be :

(£150,000 x 0%) + (£847,992.64 x 1%) = £8,479

The date for the first three yearly review will be the third anniversary of the effective date of the transaction, 1 May 2018. This return must be made to us by the filing date of 31 May 2018.

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