Example 9 , Acquisition by a connected company
- A enters into a sale and purchase agreement with B for some land with a consideration of £1 million which reflects the market value of the land. Completion is set for two years after the agreement is entered into.
- After one year, the market value of the land has increased to £1.1 million. B enters into a subsale agreement with C for consideration of £900,000. C is a company connected with B. Both agreements are completed at the same time and in connection with each other.
B is chargeable on its acquisition of the land and can claim relief.
C is chargeable on its acquisition of the land. In the first instance, the chargeable consideration given by paragraph 9 (as it applies to paragraph 1 of Schedule 4) is £900,000.
The deemed market value rule in section 53 does not apply because the vendor for C’s acquisition is A (paragraph 10(4)). So the chargeable consideration is not increased to £1.1 million.
However, B and C are connected so the minimum consideration rule applies to increase the chargeable consideration for C’s acquisition to £1 million.