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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Reliefs and Exemptions: Sale and leaseback arrangements

The provisions of section 57A Finance Act 2003 apply for a sale and leaseback arrangement means an arrangement under which:

* A transfers or grants to B a major interest in land, (the sale), and
* out of that interest B grants a lease to A (the leaseback).

As this transaction is an exchange, both parts of the transaction are, under the provisions of section 47 Finance Act 2003, chargeable on the greater of either the market value of the interests transferred or the consideration given (see SDLTM04020). However, where all the conditions of S57A (3) are met, the leaseback element will be exempt. These conditions are:

* the sale transaction must be entered into wholly or partly in consideration of the leaseback
* the interest leased back must be an interest out of the original interest
* the sale leg must be in wholly or partly in consideration of the leaseback, where partly the only other consideration is the payment of money or release from/assumption of a debt
* there is no transfer of rights under section 45 or 45A FA03 involved in the transaction and
* where A and B are both bodies corporate at the effective date they are not members of the same group for the purposes of group relief (paragraph 1 Schedule 7 Finance Act 2003).

Irrespective of whether relief for the leaseback is claimed, the chargeable consideration for each leg is determined by the exchange rules at FA03/S47 and FA03/SCH4/PARA5 . (SDLTM04020)

The chargeable consideration for the sale leg will depend upon whether there was a written agreement, at the time of the sale, for the leaseback leg to be entered into. If there was, the chargeable consideration for the sale leg should take this encumbrance into account (see SDLTM04020a, example 3) . If there is no such agreement, the chargeable consideration for the sale leg will relate to the unencumbered interest in land.

As a consequence of amendments inserted by FA 2004, the scope of the relief has been extended so that it now applies in circumstances where the sale is effected by the grant of a lease followed by an underlease back. The relief is also available in respect of sale and leaseback transactions in residential property. The leaseback element of an equity release or home reversion transaction may benefit from relief if all the qualifying conditions are met.

There is no particular requirement for a leaseback to be in consideration of only one sale, or for one sale to be in consideration of only one leaseback for the relief to apply. It is possible to have one sale with multiple leasebacks and also to have several sales with only one leaseback.

Refer to legislation at:

* FA03/S57A
* FA04/S296
* FA04/SCH39/PARA16