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HMRC internal manual

Stamp Duty Land Tax Manual

Scope: How much is chargeable: Non-cash consideration: Exchanges FA03/SCH4/PARA5

Two parties might enter into two or more land transactions in consideration for each other. One might accept an area of land or a building as all or part of the consideration for disposing of another.

FA03/SCH4/PARA5(3) sets out how the chargeable consideration for each transaction will be calculated. 

The amount of the chargeable consideration will depend on whether the subject matter of any of the transactions is a major interest in land as defined in FA03/S117. See SDLTM04130.

If the subject matter of any of the transactions is a major interest in land, then chargeable consideration for each acquisition will be the greater of two amounts. The first amount is the market value of the subject-matter of the transaction, together with the rent payable if the subject matter is the grant of a new lease. The second amount is what the chargeable consideration would normally be ignoring the special exchanges rules. The market value of an asset does not include Value Added Tax (VAT) (see SDLTM04140). However, the “second amount” described above should include VAT in the normal way (see SDLTM03800).

These rules were introduced to stop the exploitation of the exchanges rules to avoid tax. 

Apportionment of consideration

Where an interest in land is given in exchange for a less valuable interest in land, the consideration given may need to be apportioned to determine the chargeable consideration given for the interest received. This apportionment has to be on a just and reasonable basis as is required by paragraph 4 of Schedule 4. If the more expensive interest is given partly in consideration for another interest and partly in respect of another matter (for example, making a gift or for the receipt of cash) then its value should be apportioned between the chargeable consideration for the interest acquired and the other matter.

If the subject matter of all the transactions are minor interests then the values of the interests being exchanged are disregarded but any other chargeable consideration will remain liable to tax.

See SDLTM01410 for further guidance on fixtures and fittings.

See SDLTM04020a for examples.

In relation to sale and leasebacks or lease and leasebacks, the leaseback element of the exchange may be exempt if the conditions of s57A(3) FA2003 apply. See SDLTM16040.

Irrespective of whether relief for the leaseback is claimed, the chargeable consideration for each leg should represent the market value of the interest acquired under the respective leg.