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HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
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Scope: How much is chargeable: Sale of land with associated construction, &c, contract

This paragraph deals with determining the chargeable consideration for stamp duty land tax purposes where V agrees to sell land to P and V also agrees to carry out work, commonly works of construction, improvement or repair, on the land sold.

The Stamp Office view is that the decision in Prudential Assurance Co Ltd v IRC [1992] STC 863 applies for the purposes of Stamp Duty Land Tax (SDLT) as it did for stamp duty. This is because the basis of the decision was the identification of the subject matter of the transaction and this is as relevant for SDLT as it is for stamp duty.

The identification of the subject matter of the transaction must have regard to the commercial substance of the transaction.

A common example is where land is transferred by V to P and at that date the work on the land either has not started or is incomplete.

In this case the subject matter of the land transaction will normally be the land in its condition at the date of transfer.

In other words the consideration for SDLT purposes will, subject to apportionment as mentioned below, be the consideration attributable to the land, together with the consideration attributable to the work already carried out on the land at the date of transfer.

There may be cases however where the agreement for the sale of the land is so interlocked with the agreement for works that it is not capable of independent completion.

This may occur in particular if the agreements provide that if default occurs on one agreement the other is not enforceable.

In such a case the subject matter of the land transaction will be the land with the works completed, so that the chargeable consideration will be the aggregate consideration.

Where the sale of land and the construction, etc, contract are in substance one bargain, as they were in the Prudential case, there must be a just and reasonable apportionment of the total consideration given for all elements of the bargain in order to arrive at the chargeable consideration for SDLT purposes.