SDLT Sub sale relief

If you’re a buyer who contracts to complete a land transaction and transfers the land rights to a third party before the transaction completes, you may be able to SDLT claim sub sale relief. In order to make sure that you can claim it, two conditions must be satisfied:

• At least two parties have entered into a contract for the purpose of a land transaction – e.g. a sale or lease, and;
• The original buyer of the land transaction agrees to enter into another land transaction (sub-sale) with a third party against the property involved in the first transaction – but does so before the original transaction is concluded.

The buyer of the original land transaction and the person to whom the rights are being transferred to as a sub-sale relief, must submit their SDLT (Stamp Duty Land Tax) returns and pay the due amount – only then can the original buyer claim sub-sale relief. The relief cannot be granted if it is proven legally that the sub-sale arrangements were merely put in place to avoid paying tax.

Stamp Duty Land Tax Sub sale relief exists to ensure that SDLT is paid only by the final transferee – as in, the individual who actually acquires the piece of land in the end.

How to know what qualifies as Stamp Duty Land Tax sub sale relief?

There are broadly two types transaction which qualify for sub-sale relief:

• Assignment of rights
• Free-standing transfer

Assignment of rights

An assignment of rights occurs when a third party completes the original contract.

Let’s say a buyer, John, enters into a contract for purchasing a business premises from a seller, Bill. Before the purchase is finalised, John assigns contractual rights to an assignee, Belinda.

Belinda would then effectively be the transferee under the original contract, and John would no longer be a part of the transaction.

Bill, however, must submit his SDLT return. He will calculate the payable amount based on the amount which was to be paid under the original contact. And, he can then claim sub-sale relief.

John must also submit his SDLT return, calculating the payable amount based on the price he actually paid.

Free-standing transfer

Any transaction where the buyer can claim relief but one which hasn’t been classified as an assignment or rights, is called a free-standing transfer.

Here’s an example of a free standing transfer: John and Bill enter into a contract for the sale of an office building and before the purchase is concluded, Bill enters into another contract with a third party buyer, let’s say Goldstar Properties, to sell the office building either partially or fully to them once the original contractual terms between Bill and John have been satisfied.

In this case, naturally, Bill would be the one submitting his SDLT return for the purchase, calculating the payable amount based on the actual purchase price. And in doing so, he can claim Stamp Duty Land Tax sub-sale relief.

However, sub-sale relief cannot be claimed if the original contract (between Bill and John) completes before a contract is entered into for the sub-sale between the first buyer, John, and the third party, Goldstar Properties.

Working with a land transaction Tax Accountants Slough

Does the above sound too complicated? Not sure whether you can claim sub-sale relief? Our friendly land transaction Tax Accountants Slough are only a phone call away and will offer tailored advice according to your unique circumstances.

Further knowledge on the subject from HMRC can be found here.

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