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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Example 2, Subsale and minimum consideration rule

This is an example of a subsale. It also illustrates how the minimum consideration rule works where parties are connected.

  • A enters into a sale and purchase agreement with B for some land with a consideration of £1 million payable on completion.
  • B enters into a sale and purchase agreement for the same land with C for consideration of £900,000 payable on completion.
  • At a single completion meeting the sales from A to B and from B to C complete; consideration of £900,000 is paid by C to B and consideration of £1 million is paid by B to A.

B and C are unconnected

If B and C are unconnected and acting at arm’s length, then the intended outcome is that B should have to make a land transaction return for a transaction with consideration of £1 million but can include a claim for full relief. C should have to make a land transaction return with consideration of £900,000.

The transactions fall within the new legislation in the following way.

  • The transactions fall within the definition of a pre-completion transaction that is a free-standing transfer (paragraph 1(1)-(2) and paragraph 2(2)).
  • Under paragraph 1(1), 1(2) and 2(3): the original contract is the contract between A and B, the original purchaser is B, the transferee is C and the transferor is B.
  • The transferee is not regarded as entering into a land transaction by reason of the pre-completion transaction (paragraph 3).

The pre-completion transaction is not an assignment of rights so paragraph 9 applies.

In the absence of any special provision, B is regarded as entering into a land transaction with A for consideration of £1 million (section 44(3)).

The pre-completion transaction is a qualifying subsale under paragraph 16 and falls within the conditions set out in paragraph 16(1). So B can claim relief under sub-paragraph (6) (subject to the rest of the conditions set out in paragraph 16 and paragraph 18).

C’s acquisition from B falls with section 44(3). The consideration is taken to include the consideration given for the free-standing transfer (paragraph 9(2)), although that is nil in this case. So the consideration is just the £900,000 paid by C to B in the normal way.

The vendor for C’s acquisition is A (paragraph 10(4)); the land transaction return should be completed accordingly.

B and C are connected

If B and C are connected, then C’s acquisition would be subject to the minimum consideration rule - paragraphs 12-14 - with the intended outcome that the chargeable consideration should be increased from £900,000 to £1 million.

  • The consideration for C’s acquisition is taken to be the greatest of three amounts: either the £900,000 already determined above or the first minimum amount or the second minimum amount (paragraph 12(2)).
  • The first minimum amount is defined in paragraph 13(1) (subject to paragraph 13(2)). In this case it is the £1 million that was due under the contract between A and B.
  • The second minimum amount is set out in paragraph 14 and is the total of the net amounts of consideration (as determined in sub-paragraph (2)) given by the relevant parties (as per sub-paragraph (3) subject to sub-paragraph (4)). In this case, B and C are the relevant parties. The net amount of consideration given by C is £900,000. The net amount of consideration given by B is £100,000 (that is, the £1 million given to A less the £900,000 received from C). So the total of the net amounts of consideration is £1 million.
  • The result is that the consideration for C’s acquisition is £1 million - the greatest amount out of £900,000, £1 million and £1 million.
  • The vendor for C’s acquisition is A (paragraph 10(4)); the land transaction return should be completed accordingly.