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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Example 4, Subsale of part

This is an example of how the rules apply to a subsale relating to only part of the land under the original contract.

  • A enters into a sale and purchase agreement with B for some land with a consideration of £1 million payable on completion. The land consists of Plot 1 (value: £600,000) and Plot 2 (value £400,000).
  • B enters into a subsale agreement to sell Plot 2 to C for £400,000.
  • At a single completion meeting the sales from A to B and from B to C complete; consideration of £400,000 is paid by C to B and consideration of £1 million is paid by B to A.

The intended outcome is that B should have to make a land transaction return for a transaction with consideration, on first principles, of £1 million but can include a claim for partial relief reducing the consideration to £600,000. C should have to make a land transaction return with consideration of £400,000.

The transactions fall within Schedule 2A in the following way:

  • The transactions fall within the definition of a pre-completion transaction in paragraphs 1(1) and (2).
  • The pre-completion transaction is a ‘free-standing transfer’ within 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.

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 £400,000 paid by C to B in the normal way.

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). Since the subsale relates to only part of the subject-matter of the original contract, B cannot claim full relief under sub-paragraph (2). Instead, the consideration for the transaction is reduced under sub-paragraph (3). The reduction is the amount of the £1 million consideration referable to Plot 2. In this case that is £400,000 so the consideration is reduced to £600,000.