SolvedSDLTM13080 | Calculation of stamp duty land tax: Rent: Net present value: Example of manual calculation
From HM Revenue & Customs · Stamp Duty Land Tax Manual
A lease is granted for a fixed term of ten years and the rent payable in each year (per the lease document) is as follows:
| Year | Rent payable |
|---|---|
| Year 1 | Rent £4000 |
| Year 2 | Rent £5000 |
| Year 3 | Rent £6000 |
| Year 4 | Rent £7000 |
| Year 5 | Rent £8000 |
| Year 6 | Rent £9000 |
| Year 7 | Rent £9500 |
| Year 8 | Rent £10000 |
| Year 9 | Rent £10500 |
| Year 10 | Rent £11000 |
The net present value (NPV) of the rental over this period is calculated as follows:
| Year | Calculation | Net Present Value (NPV) |
|---|---|---|
| Year 1 | 4,000/(1+0.035) | £3,864.73 |
| Year 2 | 5,000/[(1+0.035) x (1+0.035)] | £4,667.55 |
| Year 3 | 6,000/[(1+0.035) x (1+0.035) x (1+0.035)] | £5,411.66 |
| Year 4 | 7,000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £6,100.10 |
| Year 5 | 8,000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £6,735.79 |
| Year 6 | 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £6508.00 |
| Year 7 | 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £6287.93 |
| Year 8 | 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £6075.29 |
| Year 9 | 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £5869.85 |
| Year 10 | 8000/[(1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035) x (1+0.035)] | £5671.35 |
| Total | £57192.25 |
The NPV is the sum of the calculated values, that is £57,192, rather than the £80,000 rent actually payable in accordance with the lease.
Note that for the purposes of the calculating NPV, the figure of £8,000 is used for years 6 to 10 inclusive as this is the highest rent payable in any consecutive twelve month period in the first five years.
This figure replaces the rent actually payable for these years for the purposes of the NPV calculation only. See FA03/SCH17A/PARA7