Special rules apply to calculate net present value (NPV) of
all variable rents (refer to
SDLTM13135). Where the rent is
uncertain, unascertainable or contingent,FA03/S51(1) andFA03/S51(2)
set out the assumptions or estimates to be used in determining rent
for the purposes of the calculation.
In many cases the variation provided for in the lease cannot
be quantified at the date of grant of the lease, for example where
rents are to be reviewed in line with market rents or business
results as at a future date, or index-linked. Such rents are
uncertain or unascertainable. For the purposes of
calculating NPV for the first five years, a reasonable estimate
should be made of the amount payable (FA03/S51(2)). This need not
necessarily be a professional valuation, but evidence of the basis
of the estimate must be kept in case of query. Refer to
SDLTM13200 to SDLTM13245 for examples.
Leases may also provide for the level of rent payable to be
wholly or partly dependent upon an unknown outcome, such as the
granting of planning permission. Such rents are
contingent. Where the rent is contingent, NPV for
the first five years is calculated on the basis that any contingent
amount will be payable (or will not cease to be payable)
(FA03/S51(1)).
No other parts of FA03/S51 apply to the rental element of
leases. Thus, if the contingency does not occur, it is not possible
to amend the calculation under FA03/S80(4) and it is not possible
to apply for deferment of payment of stamp duty land tax under
FA03/S90 because some of the rent is contingent or unascertained.
However, there is provision at FA03/SCH17A/PARA8 to adjust
these figures in certain circumstances (Refer to
SDLTM13155).
