Example of Land Assignment Rules for Partial Land Rights Transfer

SDLT when rights over part of a property are assigned before completion

When a buyer assigns its rights over only part of a property before completion, SDLT does not simply move to the new buyer. The rules can create separate SDLT positions for the new buyer, the original buyer’s retained part, and a notional transaction for the part assigned, even if relief means no tax is due on that notional transaction.

• If only part of the land is assigned, SDLT is worked out as if there were a separate original contract for that part.
• The transferee is treated as buying the assigned part and is charged SDLT on the amount paid for that part.
• The original buyer may also be treated as having a notional land transaction for the assigned part, but full relief may be available.
• The original buyer’s purchase of the part it keeps is analysed separately under the normal completion rules.
• If the original price was not split between the different parts, it must be apportioned on a just and reasonable basis.
• These rules do not apply where the later deal changes the type of interest, such as a freehold contract followed by the grant of a lease or a headlease followed by a sublease.

Scroll down for the full analysis.

SDLT on assigning rights over part of a property before completion

This page explains how the SDLT pre-completion transaction rules can apply where a buyer under an original contract passes on its rights over only part of the land to someone else before completion. The result is not simply that the new buyer pays SDLT and the original buyer disappears. The rules can create separate SDLT positions for the original buyer and the new buyer, and the original buyer may need to file a return even where relief removes the tax.

What this rule is about

The source material deals with an assignment of rights affecting only part of the land covered by the original purchase contract. In SDLT terms, this sits within the rules on pre-completion transactions in Schedule 2A.

These rules matter because, before completion, the original buyer may transfer or assign rights under the contract to another person. Where that happens, SDLT does not simply follow the original contract in a straightforward way. Instead, the legislation can treat the parties as if there were separate transactions, so that the tax position matches what has actually happened on the ground.

Where only part of the original property is assigned, the legislation requires the analysis to be done as if there were a separate original contract for that part. That is the key point in this example.

What the official source says

The example starts with A agreeing to sell land to B for £1 million. The land has two parts: Plot 1 worth £600,000 and Plot 2 worth £400,000. Before completion, B assigns its rights under the contract for Plot 2 to C.

C then completes the purchase of Plot 2 and pays A £400,000. B completes the purchase of Plot 1 and pays A £600,000.

HMRC’s manual says the arrangement falls within the Schedule 2A rules for a pre-completion transaction. The assignment of rights over Plot 2 is treated as an assignment of rights within paragraph 2(1). For the purposes of applying the rules, the original contract is the contract between A and B, B is the original purchaser, C is the transferee, and B is also the transferor.

Because only part of the land was assigned, paragraphs 4 and 5 are applied as if there were a separate original contract for Plot 2. On that basis:

• C is treated as the purchaser of Plot 2 under section 44(3).
• The chargeable consideration for C is £400,000, being the amount C pays A on completion for Plot 2.
• B is treated as entering into a notional land transaction in relation to Plot 2, with consideration of £400,000.
• B can claim full relief under paragraph 15 against the tax on that notional transaction.
• B’s own completion of Plot 1 remains within section 44, and the chargeable consideration for that purchase is £600,000.

The manual also points out that in this example the split between Plot 1 and Plot 2 is clear. In other cases, the original consideration may need to be apportioned on a just and reasonable basis.

Finally, the source says that if the original contract is for a freehold, an assignment or subsale involving the grant of a lease out of that freehold is not a pre-completion transaction, because the lease is not the whole or part of the subject matter of the original contract. The same applies where the original subject matter is a headlease and the later dealing is the grant of a sublease.

What this means in practice

The practical effect is that a partial assignment does not simply carve out the assigned part and leave everything else untouched. SDLT has to be worked through separately for:

• the transferee’s acquisition of the assigned part,
• the transferor’s notional transaction for that same part, and
• the original purchaser’s completion of the part it keeps.

In the example, C is taxed by reference to the £400,000 it pays for Plot 2. B is also treated as having a notional SDLT transaction for Plot 2, also measured by £400,000, but B can claim full relief. B must then separately account for its actual acquisition of Plot 1 for £600,000.

This means the original purchaser may still have filing obligations even though it no longer acquires the assigned part itself. That is easy to miss if the parties focus only on who ends up owning the land.

The example also shows that the amount paid by B for Plot 1 does not get mixed into C’s chargeable consideration for Plot 2. The legislation treats the assigned part as if it had its own separate original contract.

How to analyse it

A sensible way to analyse this kind of case is:

• Identify the original contract and the original purchaser.
• Ask whether there has been a pre-completion transaction within Schedule 2A.
• Check whether the later dealing is an assignment of rights over the whole of the original subject matter or only part of it.
• If it is only part, isolate that part and apply the rules as if there were a separate original contract for that part.
• Work out the SDLT position of the transferee for the assigned part.
• Work out whether the transferor has a notional land transaction and whether relief is available.
• Then return to the part retained by the original purchaser and analyse that separately under section 44.
• If the original contract price was not expressly split between the parts, consider how to apportion it on a just and reasonable basis.

Questions to ask in practice include:

• Exactly what land or interest was covered by the original contract?
• What rights were assigned, and over which part?
• Who paid what amount, to whom, and for which part?
• Is there a clear allocation of value between the different parts of the property?
• Does the later transaction involve the same kind of property interest as the original contract, or has the form changed, for example from freehold to lease?

Example

A agrees to sell two adjoining plots to B for £1 million. The contract and the parties’ evidence show that Plot 1 is priced at £600,000 and Plot 2 at £400,000. Before completion, B assigns its rights to buy Plot 2 to C. C completes directly with A and pays A £400,000. B completes only for Plot 1 and pays A £600,000.

On the approach set out in the source material:

• C has a land transaction for Plot 2 with chargeable consideration of £400,000.
• B has a notional land transaction for Plot 2 with consideration of £400,000, but can claim full relief.
• B also has a separate land transaction for Plot 1 with chargeable consideration of £600,000.

So there are three SDLT positions to consider, even though only two plots are ultimately acquired.

Why this can be difficult in practice

The main difficulty is often not the legal structure but the valuation and allocation exercise. The example is simple because the contract already makes clear that £600,000 relates to Plot 1 and £400,000 to Plot 2. Real transactions are often less tidy.

If the original contract gives a single price for a larger site and only part is later assigned, the consideration may need to be apportioned on a just and reasonable basis. That can involve judgement, especially where the plots are interdependent, have development value, or are not separately priced in the deal documents.

Another difficulty is identifying whether the later transaction is really an assignment of rights over the whole or part of the original subject matter. The source specifically warns that if the original contract is for a freehold, but the later transaction is the grant of a lease out of that freehold, that is not a pre-completion transaction of the kind described here. The same issue arises where the original subject matter is a headlease and the later transaction is a sublease. In those cases, the later interest is not the same as the whole or part of the original subject matter.

A further practical point is compliance. Because the original purchaser may have a notional transaction even where full relief is available, parties can overlook the need for a return. The fact that no tax is ultimately payable on that notional transaction does not mean the transaction can be ignored.

Key takeaways

• If rights are assigned over only part of the land under the original contract, SDLT is worked out as if there were a separate original contract for that part.
• The transferee is taxed on its acquisition of the assigned part, while the original purchaser may also have a notional transaction and may need to claim relief.
• Where the original price is not already split between the parts, the consideration must be apportioned on a just and reasonable basis.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example of Land Assignment Rules for Partial Land Rights Transfer

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