Just and Reasonable Apportionment in Notional Transactions Explained

SDLT: just and reasonable apportionment under section 75C(5)

Section 75C(5) applies when working out SDLT on a notional transaction between V and P and the same payment relates to more than one chargeable interest. Instead of treating the whole amount as consideration for P’s transaction, the amount can be split on a just and reasonable basis so that the SDLT calculation reflects the facts fairly.

• The rule is relevant only for the section 75C deemed transaction between V and P.
• It applies where consideration is partly for the chargeable interest acquired by P and partly for another chargeable interest.
• You should not automatically include the full amount in P’s notional transaction if the payment covers more than one interest.
• The split must be just and reasonable, based on the facts, the documents and a sensible commercial method.
• This matters because too much or too little of the consideration allocated to P can affect the SDLT due.
• There is no fixed formula in the guidance, so complex or bundled transactions may need careful judgement and evidence.

Scroll down for the full analysis.

SDLT: just and reasonable apportionment under section 75C(5)

This page explains a narrow but important SDLT rule. It deals with cases where, for the purposes of the section 75C rules, you must work out the chargeable consideration for a notional transaction between V and P, but the amount paid or received relates only partly to the land interest acquired by P and partly to some other chargeable interest. In that situation, the legislation allows a just and reasonable apportionment.

What this rule is about

Section 75C creates a deemed or notional land transaction in certain arrangements. To apply the SDLT rules, you then need to identify the chargeable consideration for that notional transaction between V and P.

The problem addressed by section 75C(5) is practical. A payment, or other consideration, may not relate neatly to one land interest alone. It may cover:

• the chargeable interest acquired by P, and
• another chargeable interest as well.

If so, the whole amount should not automatically be attributed to the notional transaction with P. Instead, the legislation permits the amount to be split on a just and reasonable basis.

What the official source says

The official material states that, when calculating the chargeable consideration for the notional transaction between V and P, a just and reasonable apportionment can be made where consideration received or given is partly for the chargeable interest acquired by P and partly for another chargeable interest.

The key points are:

• the rule applies when working out consideration for the section 75C notional transaction;
• it applies where the same consideration relates to more than one chargeable interest; and
• the legislation does not require an all-or-nothing approach, but allows apportionment.

What this means in practice

In practice, you first identify the consideration that is relevant to the arrangements. You then ask whether any part of that consideration relates to the chargeable interest acquired by P and whether another part relates to a different chargeable interest.

If the answer is yes, you do not simply include the full amount in the notional transaction between V and P. Instead, you allocate an appropriate part to that transaction, provided the allocation is just and reasonable.

This matters because the amount of chargeable consideration affects the SDLT calculation. An over-allocation may produce too much tax. An under-allocation may understate the tax due.

The expression just and reasonable is important. It does not point to a rigid formula in the source material. It suggests a fair allocation based on the facts of the transaction.

How to analyse it

A sensible way to approach this rule is:

• Identify the notional transaction between V and P that section 75C requires you to consider.
• List the consideration that has been given or received under the arrangements.
• Ask whether any item of consideration relates only to the chargeable interest acquired by P, or whether it also relates to another chargeable interest.
• If it relates to more than one chargeable interest, decide how that item should be split.
• Check whether the basis of allocation is genuinely just and reasonable in light of the facts.
• Use only the apportioned amount when calculating the chargeable consideration for the notional transaction between V and P.

Questions worth asking include:

• What exactly is being acquired by P?
• What is the other chargeable interest to which the same consideration relates?
• Is there evidence in the contractual documents showing how the price was arrived at?
• Is there a commercial basis for the split adopted?
• Does the proposed apportionment reflect the substance of the arrangement?

Example

This is only an illustration of the apportionment principle.

Assume that, within arrangements caught by section 75C, one amount of consideration is paid under a deal covering two chargeable interests. Only one of those interests is the chargeable interest acquired by P for the purposes of the notional transaction between V and P. In that case, the full amount is not automatically treated as consideration for P’s notional transaction. A fair part may be allocated to P’s interest, and the balance may be attributed to the other chargeable interest.

The correct split will depend on the facts. The source material does not prescribe a single method.

Why this can be difficult in practice

The source material is brief and does not lay down a detailed test for what counts as just and reasonable. That leaves room for judgement.

Difficulties can arise where:

• the documents do not separately price the different chargeable interests;
• the transaction is commercially bundled, so that the parties negotiated one overall price;
• different valuation methods might produce different allocations; or
• the arrangements are complex and it is not obvious which part of the consideration relates to which interest.

The phrase just and reasonable does not mean any split the parties prefer. The allocation should be supportable by the facts and by a coherent method. Where the facts are finely balanced, the outcome may be uncertain.

Key takeaways

• Section 75C(5) allows consideration to be apportioned where it relates partly to P’s acquired chargeable interest and partly to another chargeable interest.
• The purpose is to calculate the chargeable consideration for the notional transaction between V and P on a fair basis.
• The legislation permits a just and reasonable apportionment, but the source material does not prescribe a single method, so the facts matter.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Just and Reasonable Apportionment in Notional Transactions Explained

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