Example:
A ten year lease with an annual rent of £100,000 was executed on 1 May 2012. 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. This is treated as a grant of a new lease, for LBTT purposes, 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 the increased rent and rent payable in the additional term only. That is, £20,000 per annum from May 2015 to April 2022 and £120,000 from May 2022 to April 2032.
The Net Present Value (NPV) is calculated from 7 years’ annual rent of £20,000 and 10 years’ annual rent payable of £120,000. This results in a NPV of £906,704.
Using the rates and bands for leases, the total tax chargeable would be :
(£150,000 x 0%) + (£756704 x 1%) = £7567
The date for the first three yearly review will be the third anniversary of the effective date of the transaction, that is, 1 May 2018. This return must be made to us by the filing date of 31 May 2018.
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