Example of Subsale Rules for Part of Land in Original Contract

SDLT subsale relief for part of a property sold on before completion

Where a buyer agrees to buy land and, before completion, sells on only part of it to another buyer, SDLT relief may be available so the middle buyer is taxed only on the part they keep. In a partial subsale, the relief reduces the original consideration only by the amount properly attributable to the part sold on, provided the Schedule 2A conditions are met.

• If A agrees to sell land to B, and B sells part of that land to C before completion, special pre-completion rules in Schedule 2A Finance Act 2003 may apply.
• Where the onward sale covers only part of the original land, subsale relief is only partial, not full.
• B is still treated as buying the whole property from A at completion, but can claim relief for the part of the original price referable to the land sold on to C.
• In the example, A sells two plots to B for £1 million, B sells Plot 2 to C for £400,000, and B is taxed on £600,000 after relief while C is taxed on £400,000.
• This helps prevent double SDLT on the subsold part, but the transaction must qualify and the legal classification, apportionment of value, and timing can all affect the result.

Scroll down for the full analysis.

SDLT subsale relief where the subsale covers only part of the original land

This page explains how SDLT is meant to work where a buyer agrees to buy land under one contract, then sells on only part of that land to someone else before completion. The official example shows that the middle buyer is not automatically taxed on the full original price if part of the land is genuinely subsold, but the relief is only partial where the subsale covers only part of the original contract.

What this rule is about

The issue is a common one in staged property deals. A agrees to sell land to B. Before that purchase completes, B enters into another deal with C so that C will end up with part of the land. SDLT then has to decide who is treated as buying what, and on what consideration.

Without special rules, B could be treated as acquiring all the land from A for the full contract price, even though part of the land is being passed on to C at completion. Schedule 2A to the Finance Act 2003 contains special rules for these pre-completion transactions, including subsale relief.

The example here deals with a partial subsale. That matters because full relief is not available if the onward sale only covers part of the land in the original contract.

What the official source says

In the example, A agrees to sell two plots to B for £1 million in total. Plot 1 is worth £600,000 and Plot 2 is worth £400,000. Before completion, B agrees to sell Plot 2 to C for £400,000. Both transactions complete at the same time.

The official analysis is:

• The arrangements fall within the Schedule 2A rules on pre-completion transactions.
• The transaction between B and C is treated as a free-standing transfer, not an assignment of rights.
• C is not treated as entering into a land transaction merely because of the pre-completion transaction itself. Instead, C’s actual acquisition is taxed under the normal completion rule in section 44(3).
• C is treated as acquiring Plot 2 for £400,000.
• B would, apart from relief, be treated as acquiring the whole of the land from A for the full £1 million under section 44(3).
• Because the onward sale by B to C is a qualifying subsale, B can claim subsale relief.
• But because the subsale relates only to part of the original subject matter, B cannot reduce the whole transaction to nil. Instead, B gets only a partial reduction in chargeable consideration.
• The reduction is the part of the original £1 million consideration that is referable to Plot 2. In the example, that is £400,000, so B is left with chargeable consideration of £600,000.

What this means in practice

The practical result is that SDLT is split in a sensible way across the two buyers:

• B is taxed only on the part of the original purchase that B actually keeps, here Plot 1.
• C is taxed on the part acquired from B, here Plot 2.

So in this example:

• B files an SDLT return for the purchase from A, starting from the full £1 million consideration but claiming partial subsale relief so that the effective chargeable consideration becomes £600,000.
• C files an SDLT return on £400,000 for the acquisition of Plot 2.

This avoids double charging on the value of Plot 2. If relief were not available, B could have been taxed on the whole £1 million and C taxed again on £400,000.

The source also makes an important structural point. The transaction between B and C is not analysed here as an assignment of contractual rights. It is analysed as a free-standing transfer. That classification matters because different parts of Schedule 2A apply depending on what exactly B has done before completion.

How to analyse it

When looking at a deal like this, the key questions are:

• What is the original contract, and who is the original purchaser?
• Has there been a pre-completion transaction before the original contract completes?
• Is that pre-completion transaction an assignment of rights, or a free-standing transfer?
• Does the onward transaction qualify for subsale relief under Schedule 2A?
• Does the subsale cover all of the land in the original contract, or only part of it?
• If it covers only part, what part of the original consideration is properly referable to that part of the land?

That last question is often the most important in a partial subsale case. The relief does not simply depend on the price paid by the onward buyer. The official example says the reduction is the amount of the original consideration referable to the part that has been subsold. In the example, the figures match neatly because Plot 2 is valued at £400,000 and C also pays £400,000. In real transactions, those amounts may not always align so neatly.

You should also separate two distinct points:

• The tax position of the middle buyer, B, under the original contract with A.
• The tax position of the onward buyer, C, on the acquisition of the subsold part.

They are connected, but they are not the same transaction.

Example

A agrees to sell a site to B for £1 million. The site contains a warehouse and a yard. Before completion, B agrees that C will take the yard only. The yard represents £400,000 of the value under the original bargain, and the warehouse represents £600,000. All transfers complete on the same day.

On the approach shown in the official example:

• B is initially within SDLT on the full £1 million purchase from A.
• Because B has made a qualifying subsale of only part of the land, B claims partial subsale relief.
• The part of the original price referable to the yard, £400,000, is left out.
• B is therefore taxed on £600,000.
• C is taxed on the acquisition of the yard for £400,000.

Why this can be difficult in practice

The main difficulty is usually not the broad principle but applying it to real facts.

First, the classification of the pre-completion transaction matters. The source says this example is a free-standing transfer and not an assignment of rights. In practice, transaction documents can be more complicated, and the legal analysis depends on what rights were actually transferred and how completion is structured.

Second, where only part of the original land is subsold, someone has to decide what part of the original consideration is referable to that part. The example uses clear values for each plot, so the answer is straightforward. In less clear cases, apportionment may be fact-sensitive.

Third, relief is not automatic simply because there is an onward sale before completion. The source says B can claim relief because the transaction is a qualifying subsale and meets the relevant conditions, subject also to the remaining conditions in paragraph 16 and paragraph 18. So the wider statutory conditions still need to be satisfied.

Finally, timing matters. The example assumes simultaneous completion of the sale from A to B and the sale from B to C. Different timing or different legal steps may change the analysis.

Key takeaways

• If a buyer subsells only part of the land before completion, subsale relief may reduce SDLT on the original purchase, but only for the part that has been subsold.
• The middle buyer is not necessarily taxed on the full original price if Schedule 2A applies and the conditions for relief are met.
• In a partial subsale, the crucial issue is what part of the original consideration is properly attributable to the land passed on to the onward buyer.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example of Subsale Rules for Part of Land in Original Contract

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