Finance Act 2003, Sections 75a–75c

(HMRC Compliance)

Comment: Sections 75A-75C of the Finance Act 2003 were introduced to prevent Stamp Duty Land Tax (SDLT) avoidance. These rules target complex property transactions designed to reduce SDLT liability.

Key Points

  • Applicability: Applies to all transactions except simple single-step ones.
  • Mechanism: Compares total SDLT paid on actual transactions to a notional transaction.
  • Retrospective Application: Applies from 6 December 2006, addressing older transactions.
  • Objective Test: Focuses on transaction outcomes, not intentions.

Main Principles

  • Anti-Avoidance: Prevents schemes reducing SDLT through artificial steps.
  • Notional Transaction: Ensures SDLT reflects true economic value.
  • Compliance: Requires careful planning and professional advice to avoid unintended liabilities.


The Finance Act 2003, Sections 75A–75C, introduces a general anti-abuse rule specifically aimed at Stamp Duty Land Tax (SDLT). This was established more than six years before the General Anti-Abuse Rule (GAAR) and is designed to address SDLT avoidance schemes.

Key Provisions


  • These sections apply to all transactions except those that consist of simple single steps, unless specifically excepted.
  • They operate by comparing the total SDLT paid on all steps of a transaction with the SDLT that would be payable on a ‘notional transaction’.


  • If the SDLT paid is less than what would be paid on the notional transaction, the real land transactions are disregarded.
  • Instead, the notional transaction becomes chargeable.
  • Credit is given for any SDLT paid on the actual transactions, and further SDLT is payable to bring the total up to that on the notional transaction.

Historical Context and Legislative Changes

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Sections 75A–75C of the Finance Act target SDLT avoidance through stricter rules and retrospective application, addressing sub-sale relief and ensuring transitional rules apply for older transactions.

Introduction and Expansion:

  • Section 75A was initially introduced by regulation and later expanded into three sections by the Finance Act 2007.
  • This expansion reflects a stricter approach to SDLT avoidance, as illustrated by the June 2010 edition of HMRC’s ‘Spotlight’ publication, which targeted schemes exploiting ‘sub-sale relief’.

Current Provisions:

  • The legislation on ‘sub-sale relief’ has been replaced by a relief concerning pre-completion transactions, designed to prevent avoidance.
  • The final version of Sections 75A–75C is more stringent than the original but applies retrospectively from 6 December 2006.

Transitional Provisions

Retrospective Taxation Concerns:

  • During the parliamentary debates on the 2007 Finance Bill, concerns about retrospective taxation were addressed.
  • A clause (FA 2007, s 71(3)) was introduced to state that for transactions entered into before Royal Assent (19 July 2007), the lesser liability under the original version of the rules would apply if it was less than the liability under the final version.

Current Application:

  • The chapter deals with the final version of the rules.
  • If a transaction commenced before 19 July 2007 and is still being processed, the transitional rules in FA 2007 should be checked to determine the applicable liability.


Objective Test

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The SDLT compliance rules under the Finance Act 2003 are objective, disregarding intentions and focusing solely on transaction outcomes, which requires careful planning, documentation, and professional advice to ensure compliance and avoid unintended tax liabilities.

The legislation under Finance Act 2003, Sections 75a–75c, establishes that the test for determining compliance with Stamp Duty Land Tax (SDLT) regulations is entirely objective. This framework is crucial for ensuring that tax obligations are met fairly and consistently, regardless of the parties’ intentions or motives.

Key Elements of the Objective Test

  • Irrelevance of Motives or Intentions: The objective test disregards the motives or intentions behind transactions. This means that even if the parties involved had no intention to avoid tax, their transactions are still subject to scrutiny purely based on their outcomes.
  • Outcome-Based Assessment: Transactions are evaluated solely on their outcomes, not on the reasons behind them. This approach ensures that any arrangement resulting in a reduced SDLT bill is examined, regardless of the rationale provided by the parties involved.

Impact on Transactions

The objective nature of the test has significant implications for transactions, particularly those involving multiple steps or complex arrangements.

  • Unintentional Tax Reduction: Even if there is no intention to avoid tax, a series of transactions that inadvertently reduce the SDLT bill can still be scrutinised. The focus is on the actual tax outcome rather than the intended purpose of the transactions.
  • Notional Transaction Comparison: The reduction in the SDLT bill, compared to what would be implied by a notional (hypothetical) transaction, can trigger an examination. If the actual transaction results in a lower tax liability than what a straightforward transaction would imply, it may be subject to further review.

Importance of Compliance

Given the objective nature of the test, compliance with SDLT rules requires careful planning and execution.

  • No Assumption of Safety: It is not sufficient to assume safety from scrutiny simply because there is no avoidance motive. Taxpayers must ensure that their transactions comply with SDLT regulations regardless of intent.
  • Careful Review of Multi-Step Transactions: All multi-step transactions must be carefully reviewed to ensure they comply with the rules. Each step needs to be analysed for its potential impact on the overall SDLT liability.

Consideration in Multi-Step Transactions

When dealing with complex or multi-step transactions, particular attention must be paid to each individual step to avoid unintended tax consequences.

  • Step-by-Step Analysis: Each step in a series of transactions should be analysed for its potential impact on the SDLT liability. This helps identify any steps that could inadvertently reduce the tax bill.
  • Application of Rules: The rules must be applied and considered in every multi-step transaction to avoid unintended tax reductions and potential legal issues. Ensuring compliance at each stage is crucial for maintaining the integrity of the tax process and avoiding penalties.

Practical Steps for Compliance

To effectively comply with the objective test requirements, taxpayers should consider the following practical steps:

  • Professional Advice: Seek professional advice to navigate the complexities of SDLT regulations and ensure all transactions are compliant.
  • Documentation and Transparency: Maintain thorough documentation and transparency in all transactions. This can provide a clear trail of the transaction steps and support compliance efforts.
  • Regular Reviews: Conduct regular reviews of transaction processes and outcomes to identify any potential issues early and address them proactively.
  • Training and Awareness: Ensure that all parties involved in transactions are aware of the SDLT rules and the importance of compliance. Training and awareness can help prevent unintentional breaches of the regulations.

By understanding and adhering to the objective test framework, taxpayers can better navigate the complexities of SDLT compliance and minimise the risk of unintended tax liabilities.


HMRC Guidance on FA 2003, ss 75A–75C

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Updated in January 2020, HMRC’s guidance on FA 2003, sections 75A–75C targets SDLT avoidance, requiring promoters to disclose schemes, notify clients of SRNs, and maintain detailed records, focusing on the transaction’s structure and outcome rather than the intent to avoid tax, as reinforced by key court rulings.

Updated Guidance

  • The HMRC guidance on the application of FA 2003, ss 75A–75C was updated on January 15, 2020.
  • This updated guidance is available at SDLTM09060 to SDLTM09370.

Non-Statutory Clearances

  • HMRC now provides non-statutory clearances on issues related to FA 2003, s 75A via email at [email protected].
  • A non-statutory clearance is written confirmation from HMRC on their view of the application of tax law to a specific transaction.
  • Taxpayers can request clearance if they:
    • Have read the relevant guidance (SDLTM09060 to SDLTM09370).
    • Cannot find the needed information.
    • Are uncertain about HMRC’s interpretation of tax legislation.

Restrictions on Clearances

  • HMRC will not provide clearances where they believe transactions are intended to avoid tax.
  • Clearances will not confirm whether FA 2003, s 75A applies to the transaction.

Areas for Clearance

HMRC may provide clearance in the following areas:

  • Whether a transaction is a ‘scheme transaction’ under FA 2003, s 75A(1)(b).
  • Identification of ‘P’ and ‘V’ under FA 2003, s 75A(1)(a).
  • Amount of chargeable consideration on the notional transaction under FA 2003, s 75A(5).
  • Whether a transaction is classed as an incidental transaction under FA 2003, s 75B.

Previous Stance and New Developments

  • Prior to January 2020, HMRC generally refused to give clearances related to FA 2003, s 75A.
  • HMRC now provides technical clearances on the application of FA 2003, s 75A, reducing some uncertainty in its application.

FA 2003, s 75A Legislation

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Section 75A of the Finance Act 2003 targets SDLT avoidance by applying to specific transaction structures without needing proof of tax avoidance intent, as reinforced by key court rulings.

The Finance Act 2003, Section 75A, is a unique piece of anti-avoidance legislation aimed at preventing Stamp Duty Land Tax (SDLT) avoidance. Unlike many other anti-avoidance laws, it does not require proof that the primary purpose of the transaction was tax avoidance. Instead, it focuses on whether the transaction meets certain legislative conditions.

Main Points

  • Absence of a Tax Avoidance Motive Test: FA 2003, Section 75A is distinct in that it does not include a ‘main purpose’ test related to tax avoidance. This means that even if the purchaser did not intend to avoid tax, the provision can still apply if the conditions are met.
  • Application Based on Conditions: The section applies to transactions that fulfil the specific conditions outlined in the legislation. The motives of the purchaser or the parties involved are irrelevant.

Case Law Support

The application of the Finance Act 2003, section 75A, which deals with Stamp Duty Land Tax (SDLT) avoidance, has been clarified and reinforced through several significant court cases. These cases have established that a tax avoidance motive is not a prerequisite for section 75A to apply, emphasising the broad reach of this provision in addressing complex property transactions.

Project Blue Limited v HMRC [2013]

  • Context: This case involved a complex series of transactions aimed at minimising SDLT liabilities on a significant property acquisition.
  • Decision: The court confirmed that there is no requirement for a tax avoidance motive for section 75A to apply. The key factor is whether the transactions fall within the scope of section 75A, not the intent behind them.
  • Implication: This ruling made it clear that section 75A could be invoked purely based on the structure and outcome of the transactions, regardless of whether the parties involved had a specific tax avoidance motive.

Upper Tribunal ([2014] UKUT 0564 (TCC))

  • Emphasis on Implicit Avoidance: The Upper Tribunal reiterated that while avoidance must be implicit in the transaction, it does not have to be the primary motive. This means that even if the parties involved did not explicitly aim to avoid tax, section 75A could still apply if the structure of the transaction results in reduced SDLT liability.
  • Clarification: The Tribunal’s decision reinforced the idea that the focus is on the effects and outcomes of the transactions rather than the intentions of the parties.

Court of Appeal ([2016] EWCA Civ 485)

  • Support for Section 75A: The Court of Appeal supported the application of section 75A in cases where an avoidance motive was absent. The court upheld the decision that section 75A can be applied based on the transactional structure alone.
  • Broad Application: This ruling underscored the broad application of section 75A, emphasising that it could be used to address any transactions that effectively reduce SDLT liability, regardless of the underlying intent.

Supreme Court ([2018] UKSC 30)

  • Final Reinforcement: The Supreme Court further reinforced that no avoidance motive is required for section 75A to apply. The highest court’s decision affirmed that the provision’s application is based purely on the transactional mechanics and outcomes.
  • Significance: This final affirmation by the Supreme Court solidified the legal understanding that section 75A is designed to counteract SDLT avoidance through complex transactions, focusing on the effects rather than the motives.

Implications for Taxpayers

  • Transaction Structure: Taxpayers must be cautious about the structure of their property transactions. Even if there is no intent to avoid tax, the way a transaction is constructed could bring it within the scope of section 75A.
  • Legal and Tax Advice: Given the broad application of section 75A, obtaining professional legal and tax advice is crucial. Experts can help ensure that transactions are compliant and do not inadvertently fall foul of this provision.
  • Documentation and Transparency: Maintaining clear and comprehensive documentation of the purpose and nature of transactions is essential. This can help demonstrate compliance and the legitimate business reasons behind the transactional steps taken.

Application Based on SDLT Liability:

  • Section 75A applies if the actual SDLT liability is less than what would arise under a notional transaction as described by the section. Essentially, if the tax paid is lower than what should be paid under a straightforward transaction, Section 75A can be invoked.

Purposeful and Realistic Application:

  • The legislation must be interpreted and applied in a manner that aligns with its purpose. This means considering the substance and reality of the transaction rather than just its form. The goal is to counteract schemes designed to avoid SDLT.

Countering SDLT Avoidance Schemes:

  • The primary objective of Section 75A is to counter SDLT avoidance schemes. By not requiring a motive test, the legislation casts a wide net, capturing any transaction that results in lower SDLT liabilities through artificial structures or schemes.


FA 2003, Section 75A is a powerful tool in HMRC’s arsenal to combat SDLT avoidance. Its unique characteristic of not requiring a tax avoidance motive test allows it to address a broad range of transactions that reduce tax liabilities through complex structures. Case law has consistently supported this broad application, emphasising the importance of the transaction’s substance over the parties’ intentions. Understanding and complying with Section 75A is crucial for anyone involved in property transactions to avoid significant tax liabilities and penalties.

Example Case: Hanover Leasing

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The Hanover Leasing case highlights the importance of careful tax planning and awareness of complex SDLT regulations to avoid additional tax liabilities, as demonstrated by their transaction designed to minimise SDLT but ultimately resulting in a £5,498,460 SDLT charge under section 75A of the Finance Act 2003.


The Hanover Leasing case revolves around the indirect purchase of a London property located at 30 Crown Place. The property was acquired for £138,850,000 and was initially owned by Greycoat Crown Place LP (GCP LP). The ownership structure was notably complex, involving a Guernsey unit trust, a common structure used in property transactions for tax planning purposes.

Transaction Steps

  1. Sale of Property: GCP LP sold the property to a Guernsey unit trust.
  2. Purchase of Units: Hanover Leasing purchased units in the Guernsey unit trust.
  3. Distribution of Property: The property was then distributed out of the Guernsey unit trust. This step was crucial as it was designed to minimise Stamp Duty Land Tax (SDLT) and other stamp taxes that would otherwise be applicable.

Tribunal Decision

The First-tier Tribunal analysed the transaction under the Finance Act 2003, section 75A, which is aimed at preventing SDLT avoidance through complex transactions.

  • Identification of Parties: The tribunal identified “V” (vendor) as GCP LP and “P” (purchaser) as Hanover Leasing.
  • Additional SDLT: Due to the application of section 75A, additional SDLT amounting to £5,498,460 was deemed payable. This was based on the tribunal’s view that the transaction was designed to avoid the proper amount of SDLT.
  • Potential Alternative Transaction: The tribunal suggested that if the transaction had been structured differently, it might have avoided the application of section 75A, indicating that the order and manner of the steps taken were pivotal in their decision.

Common Practice and HMRC Stance

  • Indirect Acquisition: It is common practice to acquire land indirectly by purchasing shares or units in a land-owning entity, rather than the property itself. This method can effectively avoid direct SDLT charges, provided no SDLT relief is withdrawn.
  • Implications of the Decision: The Hanover Leasing decision highlighted the risks associated with such transactions. It raised concerns about how HMRC might apply section 75A to transactions that involve corporate wrappers, even if those transactions appear to be innocent and in line with common practice.

The case underscores the importance of careful tax planning and the potential complexities of SDLT regulations. It also emphasises the need for specialist advice to navigate these issues and avoid substantial additional tax liabilities.


Application of the Rules

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Sections 75A-75C of the Finance Act 2003 are designed to prevent SDLT avoidance in complex property transactions by focusing on the economic reality and identifying the true beneficiary, as clarified in the Project Blue Limited v HMRC case.

The Finance Act 2003, Sections 75A–75C, sets out specific rules to prevent tax avoidance through complex property transactions. These rules apply when:

  • Vendor (V): One person, referred to as “V” (Vendor), disposes of a chargeable interest.
  • Purchaser (P): Another person, referred to as “P” (Purchaser), acquires that chargeable interest or a derived chargeable interest.

Scope of Application

  • Multiple Steps and Transformations: The rules are designed to apply regardless of the number of steps or transformations that occur between the disposal by V and the acquisition by P. This means that even if the property changes hands through a series of intermediate transactions or entities, the rules can still apply.
  • Schemes Involving Multiple Steps: The legislation specifically targets schemes that involve multiple steps or transformations, which are often used in attempts to minimise or avoid SDLT.


  • Non-Chargeable Interests: If the asset being disposed of or acquired is not a chargeable interest, the rules do not apply. A chargeable interest typically includes estates, interests, rights, or powers in or over land in the UK.

Identifying V and P

  • Complex Transactions: In transactions involving multiple parties and complex structures, identifying the Vendor (V) and Purchaser (P) can be challenging.
  • HMRC Guidance: According to HMRC guidance:
    • HMRC does not have discretion in identifying V and P for the purposes of FA 2003, section 75A.
    • Guidance on identifying P, especially in cases with multiple potential candidates, is detailed in SDLTM09160.

Project Blue Limited v HMRC Case

The Project Blue Limited v HMRC [2018] UKSC 30 case is a landmark decision that provides critical insights into the application of the anti-avoidance rules under the Finance Act 2003, specifically Sections 75A–75C. This case clarifies how the courts interpret and apply these provisions, especially in complex transactions involving multiple parties and steps.

Purposive Approach

  • Intent and Economic Reality: The court adopted a purposive approach, focusing on the intent and economic reality of the transactions rather than just their legal form. This approach aims to understand the underlying purpose of the transactions and ensure that the tax outcomes align with the legislative intent.
  • Substance Over Form: By prioritising substance over form, the court looks beyond the superficial structure of the transactions to identify the true nature and purpose, ensuring that artificial arrangements designed to avoid tax are disregarded.

Identifying the Beneficiary

  • Beneficial Owner: The court identified the Purchaser (P) as the person who ultimately benefits from the scheme transactions. This involves determining who gains a tax advantage or who would have borne the tax liability if the scheme had not been implemented.
    • Tax Benefit: P is the person who obtains the tax benefit from the transactions. This includes any relief, reduction, or deferral of tax that results from the scheme.
    • Liability in Absence of Scheme: P is also identified as the person who would have been liable for the tax if the scheme transactions had not occurred. This means looking at the hypothetical scenario where the transactions are absent and determining who would have owed the tax.

Case Background and Facts

  • Transaction Structure: Project Blue Limited was involved in a series of transactions intended to restructure property ownership in a way that minimised SDLT liability. The property was initially sold to Project Blue Limited, which then entered into various complex financial arrangements involving multiple steps and entities.
  • HMRC’s Challenge: HMRC challenged the transaction on the grounds that it was designed primarily to avoid SDLT. They argued that under Section 75A of the Finance Act 2003, additional SDLT was payable based on the overall economic effect of the transactions.

Court’s Analysis and Decision

  • Purpose and Effect: The court analysed the purpose and effect of each step in the transaction. They looked at the broader context to understand the real intention behind the arrangements.
  • Artificial Arrangements: The court determined that the transactions were artificial and primarily aimed at obtaining a tax advantage. They concluded that these steps should be disregarded for tax purposes.
  • Liability Determination: By applying a purposive approach, the court identified Project Blue Limited as P, the entity that obtained the tax benefit and would have been liable for the tax if the scheme had not been executed.

Implications of the Decision

  • Clarity on Anti-Avoidance Rules: This decision provides clarity on how the anti-avoidance rules under Sections 75A–75C should be applied. It reinforces the importance of considering the economic substance and real intention behind transactions.
  • Guidance for Future Cases: The case sets a precedent for future cases involving complex transactions and tax avoidance schemes. It highlights the courts’ willingness to look beyond legal formalities to ensure compliance with tax laws.
  • HMRC’s Enforcement: HMRC is likely to reference this decision in future enforcement actions, using it to support their interpretation of anti-avoidance rules and strengthen their position in disputes over SDLT and other taxes.

HMRC’s Interpretation

HMRC’s interpretation, referencing Lord Hodge’s judgement, includes the following considerations:

  • Tax Loss Identification: Identifying where the tax loss occurred due to the scheme transactions.
  • Liability Determination: Determining who would have been liable for the tax if the scheme transactions were not in place.
  • Exploitation of Loopholes: Emphasising the need to address the exploitation of statutory provisions to avoid tax. This interpretation aims to ensure that the intended tax outcomes of legislation are achieved and that artificial arrangements designed solely to avoid tax are countered.


The application of Sections 75A–75C of the Finance Act 2003 is crucial in preventing tax avoidance through complex property transactions. Understanding these provisions helps ensure compliance and mitigates the risk of significant tax liabilities and penalties. Key points include:

  • The rules apply to transactions involving chargeable interests, regardless of the complexity and number of steps involved.
  • Proper identification of V and P is essential, and HMRC provides detailed guidance on this process.
  • Landmark cases like Project Blue Limited v HMRC offer valuable insights into the interpretation and application of these rules.
  • HMRC’s approach focuses on the economic reality of transactions and aims to close loopholes used for tax avoidance.


Purpose of FA 2003, ss 75A – 75C

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Sections 75A-75C of the Finance Act 2003 aim to prevent Stamp Duty Land Tax (SDLT) avoidance schemes by targeting the economic substance of transactions, not their formal structure.

The purpose of these sections is:

  • To counter schemes designed to avoid the payment of Stamp Duty Land Tax (SDLT).
  • Ensuring that P not only obtained the tax benefit but also exploited a loophole in the SDLT legislation.

This interpretation aligns with the legislation’s intent to prevent SDLT avoidance through complex schemes and transactions.

Example No transfer of a chargeable interest

X Ltd owns 100% of the shares of Y Ltd, which in turn owns a valuable property. Here is an outline of the transactions and their implications:

  • Loan and Dividend Payment:
    • X Ltd makes a loan to Y Ltd.
    • Y Ltd uses the loan to pay a cash dividend to X Ltd.
    • This action reduces the value of Y Ltd to £1.
  • Share Sale:
    • X Ltd sells the shares of Y Ltd to an unrelated party, Z Ltd.
    • Assuming no other steps are involved, this transaction does not trigger section 75A.

Key Points

  • No Disposal or Acquisition of a Chargeable Interest:
    • Section 75A does not apply because there has been no disposal or acquisition of a chargeable interest.
    • Shares in a company are not considered ‘chargeable interests’, even if the company’s sole asset is property.
  • Stamp Duty:
    • There may be a saving of stamp duty on the transfer of the shares.
    • However, stamp duty is not within the ambit of Finance Act 2003, section 75A.
    • Current rules do not treat shares in a land-rich company as chargeable interests.
  • Potential Future Changes:
    • The government has occasionally proposed land-rich company rules that might change this treatment.
    • These rules could deem shares in such a company to be chargeable interests in the future.
  • General Anti-Abuse Rule (GAAR):
    • The arrangement is unlikely to fall foul of the GAAR concerning stamp taxes.
    • Stamp duty is not within the scope of the GAAR.
  • Consideration of Other Taxes:
    • This arrangement might offer advantages in relation to other taxes.
    • It is important to consider the potential impact of the GAAR on these other taxes.
    • Potential downsides related to other taxes should also be evaluated.


The described transactions between X Ltd, Y Ltd, and Z Ltd demonstrate a method to reduce the value of a subsidiary company and transfer ownership without triggering section 75A. This is due to the nature of shares not being classified as chargeable interests under the current legislation. However, changes in legislation or tax rules could alter this interpretation, necessitating careful consideration of the broader tax implications and potential future changes.


Understanding Scheme Transactions

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The rules under the Finance Act 2003, Sections 75A-75C, apply if multiple transactions, including non-land activities, are involved in the disposal and acquisition of interests, with transaction timing being irrelevant as long as they are connected.

Applicability of Rules

The rules apply if there are multiple transactions involved in the disposal and acquisition of interests. These transactions can include both land and non-land transactions.

Definition of Transactions:

  • Includes agreements, offers, or undertakings not to take a specified action.
  • Any kind of arrangement, even if not typically described as a transaction, qualifies.
  • Unilateral acts and failures to act can also be transactions.
  • The timing of transactions is irrelevant as long as they occur in connection with the disposal and acquisition.

Scheme Transactions

Transactions related to the disposal and acquisition are termed ‘scheme transactions.’ This includes those occurring even after the acquisition of the chargeable interest.

Guidance on ‘Involved in Connection With’:

  • For a transaction to be a scheme transaction, it must be essential for the transfer of the chargeable interest.
  • Simply being part of a series of transactions does not automatically make it ‘involved in connection with.’
  • If a particular transaction step is necessary for the overall outcome, it likely meets the ‘involved in connection with’ test.

Factors to Consider

HMRC provides guidance on determining whether a transaction is ‘in connection with’ the acquisition and disposal. Factors include:

  • Planning Involved: The level of planning and orchestration behind the transaction.
  • Relationship to Disposal and Acquisition: How the transaction step relates to the overall process of disposal and acquisition.
  • Proximity of Transaction Steps: The closeness in time and sequence of the transaction steps.
  • Reasons and Intent: The underlying reasons and overall intent behind carrying out the transaction step.

Examples of Scheme Transactions

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The Finance Act 2003, Sections 75A–75C, targets tax avoidance through various structured transactions, especially involving leases, emphasising the importance of evaluating the economic substance, intent, and relationship between parties to ensure compliance.

The Finance Act 2003, Sections 75A–75C, outlines various examples of scheme transactions to illustrate different scenarios that might fall under its purview. These examples help clarify the types of transactions HMRC may scrutinise for potential tax avoidance. While this list is illustrative and not exhaustive, it provides insight into common methods used to minimise tax liabilities.

Acquisition of a Lease

  • Scenario: A lease derived from a freehold formerly owned by the vendor is acquired.
  • Purpose: This type of transaction can sometimes be used to minimise tax liabilities, particularly SDLT.
  • Mechanism: By structuring the transaction as an acquisition of a lease rather than a direct purchase of the freehold, the parties involved may seek to reduce the amount of SDLT payable.

Sub-Sale to a Third Party

  • Scenario: The original buyer sells the property to a third party before the initial transaction is completed.
  • Purpose: This can be a method to transfer property without triggering certain tax liabilities that would apply if the original buyer had completed the purchase.
  • Mechanism: The original buyer acts as an intermediary, passing the property directly to the third party, potentially bypassing higher tax rates.

Grant of a Lease to a Third Party

  • Scenario: The original owner grants a lease to a third party, often with conditions such as a right to terminate.
  • Purpose: This can be part of a strategy to reduce the tax burden on the transaction.
  • Mechanism: Conditions like a right to terminate can provide flexibility and potential tax advantages depending on the structure and timing of the lease and its termination.

Exercise of a Right to Terminate

  • Scenario: A lease includes a right to terminate, and this right is exercised.
  • Purpose: The exercise of this right can be a significant event in a broader scheme to alter the tax implications of the property holding.
  • Mechanism: Terminating a lease can change the nature of the property interest and its tax treatment, possibly resulting in tax savings.

Agreement Not to Exercise a Right to Terminate

  • Scenario: Choosing not to exercise a right to terminate a lease.
  • Purpose: This decision can also be strategic within a scheme, potentially altering the tax consequences.
  • Mechanism: By maintaining the lease, the parties might avoid triggering tax liabilities that would arise from termination and subsequent transactions.

Variation of a Right to Terminate

  • Scenario: Changing the terms under which a right to terminate a lease can be exercised.
  • Purpose: This variation can have implications for the overall tax treatment of the lease arrangement.
  • Mechanism: Adjusting the termination terms can influence the timing and nature of tax liabilities, aligning them with the parties’ tax planning strategies.

Focus on Lease Transactions

The provided examples highlight a significant focus on transactions involving the grant and termination of leases. This emphasis suggests that lease transactions are a common area where tax planning strategies might be employed to minimise tax liabilities. By focusing on these transactions, the legislation aims to ensure that such strategies do not unduly reduce tax revenues.

Key Points to Consider

  • Intention Behind the Transaction: Assess whether the primary purpose of the transaction is to obtain a tax advantage or if it has a genuine commercial purpose.
  • Structure and Sequence of Transaction Steps: Analyse how the transaction is structured and the order in which steps are taken, as this can influence tax treatment.
  • Relationship Between the Parties Involved: Consider the connections and dealings between the involved parties, which can impact the interpretation of the transaction.
  • Economic Substance vs. Legal Form: Evaluate the economic reality of the transaction compared to its legal form to determine its true nature and intent.

Recognizing these factors can help in assessing whether a transaction might be deemed part of a scheme intended to avoid tax, thereby aiding in compliance and informed decision-making.

Scheme Caught by Section 75A

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The Finance Act 2003, Section 75A, enables HMRC to challenge structured transactions designed to avoid Stamp Duty Land Tax by treating them as a single scheme reflecting their true economic substance.


Agnes owns a freehold residential property valued at £2.1 million. To transfer ownership in a tax-efficient manner, she employs a structured series of transactions involving her friend Bill and an eventual buyer, Claire. The lease and sale arrangements are crafted to minimise Stamp Duty Land Tax (SDLT) liabilities.

Initial Transactions and SDLT Implications

  1. Granting the Lease to Bill
    • Lease Terms: Agnes grants a lease to Bill for a yearly rent of one peppercorn (a nominal amount), with no premium. The lease term is one month, but Bill has an option to extend the lease to 100 years for £1 if exercised within the month.
    • SDLT Implications: Since Bill holds the lease beneficially for Agnes (acting as her nominee), there is no SDLT on the grant of the lease. The actual consideration (one peppercorn) is used without substitution of market value, meaning SDLT is not triggered by this transaction.
  2. Value of Freehold Interest
    • With the likelihood that the lease extension option will be exercised, the value of the freehold interest held by Agnes becomes minimal because the long lease significantly diminishes the freehold’s value.
  3. Sale of the Freehold to Claire
    • Transaction: Agnes sells the freehold interest to Claire for £1.
    • SDLT Implications: Again, no SDLT applies because the actual consideration (£1) is used, and there is no substitution of market value.

Additional Undertaking

Agnes makes a further agreement with Claire:

  • Agreement: Agnes agrees not to exercise the option to extend the lease if Claire pays her £2.15 million.
  • SDLT Considerations: Although this could be argued to constitute a land transaction subject to SDLT, in similar complex arrangements, it has been deemed not a land transaction. Thus, Claire effectively acquires the property for £2.15 million without paying SDLT.

Potential Application of FA 2003, Section 75A

Section 75A of the Finance Act 2003 is designed to address complex schemes intended to avoid SDLT by considering a series of related transactions as a single notifiable event.

In this scenario, the following transactions are potentially scrutinised under Section 75A:

  • Grant of the Lease to Bill: This initial step sets up the series of transactions by reducing the freehold value.
  • Sale of the Freehold to Claire: Sold for a nominal amount, this step leverages the reduced value created by the lease.
  • Undertaking Not to Exercise the Lease Extension Option: Agnes receives £2.15 million for her agreement not to exercise the lease extension option.

Section 75A could treat these transactions as interconnected steps in a scheme designed to avoid SDLT. By viewing them as a single composite transaction, the legislation aims to capture the true economic substance over the legal form, potentially resulting in SDLT being applied to the overall transaction value (£2.15 million) rather than the individual, nominal amounts.


This example illustrates how multiple structured transactions can be used to transfer property ownership without incurring SDLT. However, Section 75A of the Finance Act 2003 provides HMRC with the power to challenge such schemes. By considering the series of transactions as a whole, Section 75A aims to ensure that the proper amount of SDLT is paid, reflecting the economic reality of the property transfer rather than the nominal values declared in the individual steps.

The Notional Transaction

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ The notional transaction concept ensures that the largest amount of consideration involved in a series of transactions is used to calculate the appropriate Stamp Duty Land Tax, preventing tax underpayment.

Key Criteria

The rules apply only if the total Stamp Duty Land Tax (SDLT) paid on all transactions in the scheme is less than the amount that would be payable on a ‘notional land transaction.’ This requirement is set out in the Finance Act 2003, section 75A(1)(c).

Definition of Notional Transaction

A notional transaction is defined by the Finance Act 2003, section 75A(5) as a transaction that:

  • Effects the transfer from Vendor (V) to Purchaser (P)
  • For consideration equal to the largest amount (aggregated if more than one):

Consideration Elements

Consideration is determined by the largest amount:

  • Given by or on behalf of any one person
  • Received by or on behalf of the Vendor (or a person connected with the Vendor, as determined by the Corporation Taxes Act 2010, section 1122)

This consideration is related to the scheme transactions.

Understanding the Notional Transaction

  • Reference to a notional land transaction can be confusing because the legislation does not specify the nature of the transaction.
  • The nature of the transaction is not crucial.
  • The key aspect is that there is a deemed chargeable transaction for a specified amount of chargeable consideration.
  • This specified amount determines the minimum SDLT charge.

Consideration Value

For the purposes of the Finance Act 2003, section 75A:

  • Consideration includes the money’s worth value of any in-kind consideration, as stated in section 75C(9).

These rules ensure that the SDLT charge reflects the true economic value of the transactions involved, preventing underpayment of tax.


Incidental Transactions and Reliefs

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ When calculating Stamp Duty Land Tax, incidental transactions and specific reliefs must be excluded to ensure fair tax calculations and maintain the effectiveness of particular tax reliefs.

Measuring Chargeable Consideration

When calculating the chargeable consideration for a notional land transaction under the Finance Act 2003, Sections 75A–75C, it is crucial to exclude certain amounts. These exclusions help ensure that the tax calculations are fair and that specific reliefs remain effective.

Exclusions in Calculating Chargeable Consideration

Incidental Transactions:

  • Any transaction that is merely incidental to the transfer of the chargeable interest should be excluded from the chargeable consideration. These are transactions that do not significantly affect the overall transfer but occur as part of the broader process.

Specific Reliefs:

Consideration paid in respect of transactions covered by specific reliefs under the Finance Act 2003 should also be excluded. These reliefs include various scenarios designed to facilitate certain types of transactions without imposing undue tax burdens. Key reliefs include:

  • Compulsory Purchase Facilitating Development: Under section 60, transactions that facilitate development following compulsory purchase are relieved.
  • Planning Obligations: Section 61 covers transactions necessary to meet planning obligations.
  • Demutualisation: Sections 63 and 64 provide relief for demutualisations involving insurance companies or building societies.
  • Limited Liability Partnership Incorporation: Section 65 provides relief for the incorporation of LLPs.
  • Public Body Transfers: Section 66 provides relief for transfers involving public bodies.
  • Parliamentary Constituency Reorganisation: Section 67 covers transactions related to constituency changes.
  • National Purpose Bodies: Section 69 offers relief for transactions involving bodies established for national purposes.
  • Registered Social Landlords: Section 71 provides relief for transactions involving registered social landlords.
  • Leaseholder Collective Enfranchisement: Section 74 covers collective enfranchisement by leaseholders.
  • Housing Intermediaries: Schedule 6A provides relief for transactions involving housing intermediaries.
  • PAIF and COACS Seeding Relief: Schedule 7A provides relief for transactions involving Property Authorised Investment Funds (PAIF) and Co-Ownership Authorised Contractual Schemes (COACS).
  • Charities Relief: Schedule 8 provides relief for transactions involving charities.

Importance of Exclusions

These exclusions ensure that specific reliefs remain practical and effective in real-life transactions, which often involve multiple steps for legitimate reasons. Without these exclusions, the intended benefits of the reliefs would be diminished, rendering them ineffective.

Additional Reliefs of Concern

  • Group, Reconstruction, and Acquisition Reliefs:
    • These are outlined in Schedule 7 of the Finance Act 2003. HMRC monitors these reliefs closely to prevent their exploitation. The potential for misuse underscores the need for clear interpretation and application of the legislation to ensure it aligns with the legislative intent.

Incidental Transactions as Scheme Transactions

  • Consideration Exclusion:
    • Even if a transaction is considered incidental, and its consideration is ignored when determining the chargeable consideration for the notional transaction, the incidental transaction itself can still be classified as a scheme transaction.
  • Fair Apportionment:
    • If a transaction is partially incidental to the transfer of the chargeable interest, the consideration must be fairly apportioned between the incidental and non-incidental parts. This ensures a just and reasonable allocation, maintaining the integrity of the tax calculation process.


This guidance ensures clarity in determining the chargeable consideration for notional land transactions while preserving the integrity and intended use of specific reliefs. By excluding incidental transactions and specific reliefs from the chargeable consideration, the rules uphold the practicality and effectiveness of tax reliefs in real-world scenarios, preventing undue tax burdens and ensuring compliance with the legislative intent.

Key points include:

  • Understanding the exclusions for incidental transactions and specific reliefs.
  • Recognizing the importance of these exclusions in maintaining the effectiveness of tax reliefs.
  • Being aware of additional reliefs and HMRC’s vigilance in preventing their misuse.
  • Ensuring fair apportionment in cases where transactions are partially incidental.

Effective Date

The ‘effective date’ of a notional transaction refers to the final date on which a scheme transaction is completed. Alternatively, if the substantial performance of a scheme transaction occurs earlier, that date will be considered the effective date.

Exclusions from FA 2003, s 75A

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ To prevent anti-avoidance rules from unfairly affecting legitimate transactions, the Finance Act 2003 provides specific exclusions for alternative property financing (like Islamic finance) and social housing schemes (like Right to Buy), ensuring these are taxed fairly and not penalised.

The scope of Section 75A of the Finance Act 2003 is broad, encompassing many arrangements that may be designed to achieve relief or favourable tax treatment. To address potential overreach, there are specific exclusions within Section 75A itself and additional restrictions outlined in Sections 75B and 75C.

Specific Exclusions

FA 2003, Sections 71A–73: Alternative Property Finance Reliefs

Sections 71A to 73 of the Finance Act 2003 provide specific reliefs for alternative property finance arrangements, particularly those used in Islamic finance. These sections are designed to ensure that such financing methods, which often do not involve interest payments, are not disadvantaged compared to conventional financing methods.

  • Islamic Finance Transactions: These transactions typically involve structures such as Ijara (leasing) and Murabaha (cost-plus financing). In these cases, the property is bought by a financial institution and then sold or leased to the client. Without these reliefs, these transactions could incur multiple SDLT charges.
  • Reliefs Provided: The reliefs ensure that SDLT is only paid once, mirroring the tax treatment of a conventional mortgage. This creates a level playing field between traditional and alternative finance methods.
  • Non-Applicability of Section 75A: If the reduction in SDLT is solely due to the application of these alternative finance reliefs, Section 75A does not apply. This exclusion prevents the anti-avoidance rules from unfairly targeting legitimate alternative finance transactions.

FA 2003, Schedule 9: Right to Buy and Similar Reliefs

Schedule 9 of the Finance Act 2003 addresses various social housing schemes, such as the Right to Buy program. These schemes are designed to help tenants of social housing purchase their homes at a discount, making home ownership more accessible.

  • Right to Buy Program: This allows tenants who have lived in social housing for a certain period to buy their homes at a reduced price. The aim is to promote home ownership among lower-income households.
  • Other Social Housing Schemes: Similar reliefs apply to other social housing programs that provide financial assistance or discounts to tenants purchasing their homes.
  • Reliefs Provided: These reliefs reduce or eliminate the SDLT liability that would otherwise arise from the discounted purchase price.
  • Non-Applicability of Section 75A: If the only reason for the SDLT reduction is due to these specific reliefs provided under Schedule 9, Section 75A does not apply. This ensures that social housing transactions are not penalised by anti-avoidance provisions, supporting government policy objectives to increase home ownership among social housing tenants.

Important Considerations

  • Combination of Steps: A critical aspect of these exclusions is that they apply only if the qualifying reliefs are the sole reason for the SDLT reduction. If the transaction involves additional steps beyond those covered by the specified reliefs, the exclusion may be invalidated.
  • Transaction Structure: When transactions are structured with a mix of steps, some qualifying for relief and others not, the entire transaction could fall within the scope of Section 75A. This would mean that the intended SDLT savings could be negated, and the full tax implications would need to be considered.
  • Comprehensive Assessment: Each step in a transaction must be evaluated to determine its impact on SDLT liability. If any step falls outside the specified reliefs, the whole arrangement might be scrutinised under Section 75A.

Application of Exclusions

The exclusions aim to ensure that legitimate tax reliefs are not unfairly penalised under anti-avoidance rules. However, the complexity of many property transactions means that careful planning and consideration are necessary to ensure compliance with both the letter and spirit of the law. By understanding and correctly applying these exclusions, taxpayers can achieve their intended tax outcomes without falling afoul of Section 75A.


FA 2003, Section 75B – Incidental Transactions

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Section 75B of the Finance Act 2003 defines incidental transactions related to land transfers, highlighting that some (like construction costs or furniture sales) may be excluded from tax calculations, but each case must be individually assessed to ensure they are not integral or conditional parts of the main transaction.

Section 75B of the Finance Act 2003 specifically addresses incidental transactions in the context of transferring chargeable interests. It establishes conditions under which certain transactions can be disregarded when calculating consideration for notional transactions, provided they are considered “merely incidental.”


Definition of Incidental Transactions:

  • The term ‘merely incidental’ is not comprehensively defined within the legislation, leaving some ambiguity.
  • Section 75B(3) provides examples of potentially incidental transactions, but this list is illustrative rather than exhaustive.

Examples of Incidental Transactions

Construction-Related Transactions:

  • Transactions undertaken for constructing a building on the land. These could include contracts with builders, purchase of construction materials, or other expenses directly related to the building process.

Non-Land Sales:

  • Transactions involving the sale of items other than land. For instance, selling furniture, fixtures, or fittings associated with the property but not forming part of the land itself.

Financial Transactions:

  • Loans or other financial provisions made to facilitate payment for the land transfer process. This might include securing a mortgage or arranging other financing specifically for purchasing the property.

Limitations of Incidental Transactions

  • The legislation uses the term ‘may’ to imply that not all transactions falling under the given examples are necessarily incidental. Each case requires individual assessment.
  • The examples provided in the legislation are limited and do not cover all possible scenarios. There may be other transactions that could be considered incidental, depending on the context and specific circumstances.

Exclusions from Incidental Transactions

Certain transactions are explicitly identified as not being incidental, ensuring they are included in the consideration for the notional transaction:

Transactions Integral to the Transfer:

  • Transactions that form an essential part of the process by which the chargeable interest is transferred. These are central to the main transaction and cannot be separated from it.

Conditional Transactions:

  • Transactions upon which the transfer of the chargeable interest is conditional. If a transfer depends on a specific condition being met, such transactions are not considered incidental.

Scheme Transactions:

  • Transactions specified in Section 75A(3) of the FA 2003, which are part of a scheme to avoid tax. These are designed to exploit loopholes and are explicitly excluded from being treated as incidental.

Practical Application: 


  • Claire pays Agnes £25,000 for furniture and other chattels in addition to the house. This payment is specifically for items other than land.


  • The payment for furniture and chattels, assuming it is a ‘just and reasonable’ allocation, can be considered an incidental transaction.
  • Consequently, this amount would not be included in the consideration for the notional land transaction, as it pertains to items separate from the land itself.


Section 75C – Other Exclusions and Conditions

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Section 75C of the Finance Act 2003 outlines conditions for excluding share transfers from tax calculations in land transactions, ensuring corporate reorganisations and certain administrative activities aren’t treated as tax-avoidance schemes.

Ignoring Transfers of Shares or Securities

  • A transfer of shares or securities (including units in a unit trust) is ignored for FA 2003, s 75A if it would otherwise be the first of a series of scheme transactions.
  • This provision allows for corporate reorganisation to enable a claim for relief on a subsequent land transaction.
  • When a transfer of shares or securities is ignored under FA 2003, s 75A, the consideration for these shares or securities is not included in the chargeable consideration for the notional transaction between V and P.

HMRC Confirmation

  • Administrative tasks related solely to the transfer of shares or securities, such as shareholder approval, are not usually considered scheme transactions and can be ignored when determining if the first scheme transaction would be a transfer of shares or securities.

Limitations on Exclusions

  • The exclusion applies only to transfers of existing shares.
  • The issuance of new shares or securities will not be excluded from being considered a scheme transaction, even if it is the first in a series of transactions.

Relief for Notional Transactions

  • If a real transfer equivalent to the notional transaction would have been eligible for relief, this relief applies to the notional transaction under FA 2003, s 75C(2).
  • The availability of relief is subject to the specific terms and conditions of that relief.

Transfers to Connected Companies

  • When the notional transaction is a transfer to a company connected with the vendor, FA 2003, s 53 deems the consideration to be the greater of:
    • The market value of the chargeable interest transferred.
    • The actual consideration, including any VAT, given for the transfer.
  • Consideration should be given to FA 2003, s 54 for any exceptions that might result in the disapplication of FA 2003, s 53.

Exchanges and Market Value Consideration

  • If the transfer of the chargeable interest from V to P constitutes an exchange, FA 2003, Sch 4, para 5 deems the consideration to be the greater of:
    • The market value of the chargeable interest transferred to P under the notional transaction.
    • The market value of the property given by P in exchange, along with any additional consideration given.

Example: Exclusion of First Step, Transfer of Shares

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Companies can structure corporate reorganisations to maximise tax relief by excluding initial share transfers and claiming group relief on property transfers, provided they meet specific legislative conditions.

In this example, Henry orchestrates a series of transactions involving his wholly-owned companies, Anne Ltd and Jane Ltd, to optimise tax reliefs and minimise Stamp Duty Land Tax (SDLT) liabilities.


  • Ownership: Henry owns all shares in both Anne Ltd and Jane Ltd.
  • Property Ownership: Anne Ltd owns a property that is leased to Jane Ltd at below market rent, which means the lease itself holds capital value.

Series of Transactions

First Step: Transfer of Shares

  • Transaction: Henry transfers the shares of Jane Ltd to Anne Ltd in exchange for cash.
  • Legislation: Under FA 2003, section 75C, this step is ignored for SDLT purposes.
  • Result: Ignoring this step leaves only the subsequent property transfer as relevant for SDLT considerations.

Second Step: Property Transfer

  • Transaction: Anne Ltd transfers the property to Jane Ltd as a capital contribution.
  • Group Relief Claim: This transfer claims group relief from SDLT, a relief that can apply to transactions between companies in the same group.

Legal and Tax Implications

Collapse of Lease

  • Lease Termination: By law, the lease held by Jane Ltd collapses into the freehold when the property is transferred to it.
  • Implication: This collapse means the lease no longer exists as a separate entity.

Single Step Consideration

  • Property Transfer: After ignoring the share transfer, the remaining single step is the property transfer from Anne Ltd to Jane Ltd.
  • Market Value Consideration: Since Anne Ltd and Jane Ltd are connected companies, the transaction is deemed to be at market value for SDLT purposes.
  • Group Relief: The notional transfer is eligible for group relief, potentially nullifying the SDLT charge if section 75A applies.

Optimising Tax Reliefs

This example illustrates how corporate reorganisations can be structured to optimise tax reliefs, leveraging specific exclusions and conditions within tax legislation:

  • First Step Exclusion: The exclusion of the first step (share transfer) under FA 2003, section 75C, simplifies the transaction for SDLT purposes.
  • Market Value and Group Relief: The property transfer is deemed to be at market value due to the connected company status, but the availability of group relief can potentially eliminate the SDLT charge.
  • Section 75A: By structuring the transactions in this way, the mechanism avoids the application of FA 2003, section 75A, which targets transactions designed to avoid SDLT.


This mechanism ensures that corporate reorganisations can be effectively structured to maximise tax reliefs, provided that the specific exclusions and conditions governing their application are met. Understanding these legislative provisions allows companies to navigate complex transactions while minimising tax liabilities legally.


Application of Relief to Notional Transactions

(HMRC Compliance>Finance Act 2003, Sections 75a–75c)

➤ Reliefs for notional transactions have the same conditions as real ones, and complex rules apply, especially in partnerships, to prevent tax avoidance and avoid unfair multiple tax charges.

The application of a relief to a notional transaction is subject to the same conditions and restrictions as would apply to a real transaction. This means that any relief that is available for a real transaction must also meet the normal qualifying criteria when applied to a notional transaction.

Provisions Applied to Notional Transactions

Several provisions are applied to notional transactions as if they were real transactions:

  • Interest in Property-Investment Partnership: An interest in a property-investment partnership is treated as a chargeable interest. This includes any relevant partnership property, bringing it within the scope of specific regulations.
  • Transfer of an Undertaking: If any scheme transactions are connected to a transfer of an undertaking, the notional transaction is also treated as connected to the same transfer.

Partnership Rules and Notional Transactions

Initially, the normal partnership rules were applied to notional transactions involving land transfers to or from a partnership. However, to prevent potential avoidance, amendments were made. The rules now ensure that any such notional transaction is subject to Stamp Duty Land Tax (SDLT) as if it were a transfer between two ordinary persons, which may lead to an unfair outcome in certain scenarios.

Example of Potentially Unjust Result from FA 2003, s 75A

In the case of a partnership (RST) of three individuals requiring additional premises:

  • R’s wife leases a building to R for ten years at no premium and a peppercorn rent.
  • R sub-lets the building to the partnership for ten years at a market rent, with the first year rent-free for refurbishment costs.

If these transactions are viewed separately, no SDLT arises on the initial lease, and the partnership pays SDLT on only 67% of the net present value (NPV) of rents due to R’s retained interest. However, if considered as a series under FA 2003, s 75A, the full NPV of rents would be subject to SDLT, increasing the cost despite no original avoidance intent.

Apportionment of Amounts for Notional Transactions

FA 2003, s 75C(5) and (10) require that any apportionment of amounts for measuring consideration on the notional transaction must be just and reasonable. Additionally, any SDLT paid on an actual transaction ignored under FA 2003, s 75A is treated as paid on the notional transaction, aiming to avoid double charges. Nonetheless, complex series of transactions could lead to multiple charges, even if a straightforward transfer would result in a single charge.


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This Article Written By Nick Garner
Founder Stamp Duty Advice Bureau
Author of Stamp Duty Land Tax Guide
For Property Investors.