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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Example 11, Novation

This is an example of how the rules apply to a novation.

  • A enters into a sale and purchase agreement with B for some land with a consideration of £1 million payable on completion.
  • A, B and C enter into a deed of novation under which: C replaces B as the purchaser of the land; and C pays B £100,000 in consideration for B relinquishing its rights under the first contract. Under the deed, A and B are released from any obligations to each other. Following the deed of novation, the original contract between A and B no longer exists. It has been replaced by a new contract between A and C.
  • C completes the new contract to acquire the land from A and pays A £1 million.

The novation is a pre-completion transfer (paragraph 1(1)-(2) and (5)). It is a free-standing transfer (paragraph 2(2)). It is not an assignment of rights under paragraph 2(1) because C’s right to call for a conveyance is not a right under the original contract but rather it is a right under the new contract. C is not regarded as entering into a land transaction by reason of the novation (paragraph 3).

On completion, C is the purchaser under a land transaction as per section 44(3). The chargeable consideration under paragraph 9(2) is £1.1 million.

B is not the purchaser under a land transaction so is not required to file a land transaction return and has no need to claim relief.