Scope: what is chargeable: Transfer of rights: Transfer of part only FA03/S45(5): Example
Under a contract dated 1 October A agrees to sell a plot of land to B.
The total value of the transaction is £400,000. A deposit of £5,000 is paid by B to A. As
- this is not substantially the whole of the consideration
- B does not take possession of the land
no charge to Stamp Duty Land Tax (SDLT) arises.
On 1 November B agrees to a sub-sell one quarter of the land to C for £150,000.
On 1 December, at B’s direction, C will take a conveyance from A, paying £50,000 to B and £100,000 to B.
Under the legislation
- C is liable to pay SDLT on £150,000 consideration
- B is liable to pay SDLT on the appropriate proportion of the original contract i.e. three quarters of the £400,000 total value of the original transaction
The two transfers are treated as separate contracts, one from A to B and one from A to C.
C would therefore pay tax at the rate of 1% on £150,000 and B would pay at 3% on £300,000.
Had the original contract between A & B been substantially performed then
- B would be liable to stamp duty land tax on £400,000 at the date of substantial performance
- C would be liable to SDLT on £150,000 on the date of the conveyance from A
B contracts to purchase a plot of land from A for £400,000.
B then agrees to sub-sell half of the land to C for £250,000 and retain the other half.
B does not substantially perform the contract with A prior to entering into the secondary contract with C.
C will pay £200,000 to A and £50,000 to B and the property will pass from A to C at the direction of B.
C will be liable to SDLT at 1% of the £250,000 consideration for the A to C contract.
B will pay £200,000 to A and will be liable to tax on one half of the value of the original contract i.e. £200,000. Tax would be due at the rate of 1%.
A developer B contracts to purchase a plot of land from A for £400,000.
B intends to develop the site and sub-sell in four residential plots to C, D, E & F for £150,000 each.
If the developer enters the site to develop the property or pays the bulk of the consideration then this would substantially perform the contract between A & B and tax would be due at 3% of the £400,000.
C, D, E & F would pay SDLT at 1% of £150,000 each.