LBTT6005 - Variable or uncertain rent

LBTT guidance on rules regarding the treatment of variable or uncertain rent when determining the chargeable consideration in a land transaction involving a lease.

If the amount of rent to be paid varies in accordance with the provisions of the lease (for example, where there are rent reviews or in turnover leases), then a reasonable estimate of the rent for each year of the lease should be provided in the LBTT return. (In the case of an open market rent review, it will normally be acceptable to estimate the rent payable after review as being the same as the previous rent).

However, where the rent is adjusted in line with the Retail Price Index (RPI), Consumer Price Index (CPI) or any similar index whether projected or otherwise in accordance with the provisions in the lease, it is not treated as variable or uncertain rent.   

The adjusted rent should be used when calculating the tax due at a lease review date (either on every third anniversary of the effective date of the lease, on assignation or on termination – see LBTT6014). If the rent is to only vary in accordance RPI, CPI, etc, it will be acceptable to use the annual rent at the time the lease is being reviewed as the estimate of the rent payable in the remaining term.

Example:  Rent increased in line with the Retail Price Index or Consumer Price Index or a similar index

LBTT(S)A 2013 schedule 19 paragraph 13

If the amount of rent to be paid is contingent on the occurrence of an uncertain future event, then the rent figure used in the LBTT return is determined on the assumption that the outcome of the contingency will result in the rent being paid, or as the case may be, will not cease to be payable.

LBTT(S)A 2013 section 18

LBTT(S)A 2013 schedule 19 paragraph 13

If the amount of rent to be paid depends on an uncertain future event, then a reasonable estimate of the rent should be provided in the LBTT return.

LBTT(S)A 2013 section 19

LBTT(S)A 2013 schedule 19 paragraph 13

The cases where the amount of rent is uncertain or unascertained includes cases where there is a possibility that the rent is varied under section 13, 14, 15 or 31 of the Agricultural Holdings (Scotland) Act 1991 or section 9, 10 or 11 of the Agricultural Holdings (Scotland) Act 2003.

Where a contingency ceases or it becomes clear that it will not occur, or where uncertain or unascertained consideration becomes ascertained and as a result less tax is payable, a claim for repayment cannot be made to the extent that the consideration consists of rent.

LBTT(S)A 2013 section 32(3)

In addition, it is not possible to apply for deferral of LBTT payable in relation to a lease where there is contingent or unascertained consideration that consists of rent.

LBTT(S)A 2013 section 41(5)

Ref ID: 
LBTT6005
Archive Date: 
9 March 2015
Last updated: 
6 February 2018
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