Section 75B(2) FA03: Transactions Not Considered Incidental for Charge

SDLT anti-avoidance: when a transaction is not just incidental under section 75B(2)

Under the SDLT anti-avoidance rules in sections 75A to 75C Finance Act 2003, some steps in a multi-stage land deal can be ignored if they are only incidental. However, section 75B(2) says certain steps cannot be ignored. If a transaction is needed for the transfer, forms part of the transfer process, or must happen before the transfer can complete, its consideration must still be included when working out the notional land transaction and this can increase the SDLT due.

• A step is not incidental if it is part of the series of transactions required to transfer the chargeable interest.
• A step is also not incidental if it is part of the actual process of transferring the land interest, even if it looks intermediate or administrative.
• If the transfer depends on a transaction being completed first, that transaction cannot be ignored.
• Scheme transactions specifically brought in by section 75A(3) are also treated as non-incidental.
• The rule covers both the original owner’s disposal and the ultimate purchaser’s acquisition, including an interest derived from the original interest.
• In practice, the key question is the legal and practical role of each step in getting the land interest from the original owner to the final buyer.

Scroll down for the full analysis.

SDLT anti-avoidance: transactions that are not treated as merely incidental under section 75B(2)

This page explains an important limit within the SDLT anti-avoidance rules in sections 75A to 75C Finance Act 2003. In some multi-step arrangements, certain transactions can be ignored as merely incidental when working out the tax effect of the overall arrangement. Section 75B(2) sets out transactions that cannot be ignored in that way. That matters because the consideration given for those steps must still be taken into account when calculating the chargeable consideration for the notional land transaction.

What this rule is about

Sections 75A to 75C are aimed at arrangements involving land where the steps taken produce less SDLT than a direct transfer would have produced. The legislation can replace the actual steps with a notional land transaction between the original owner and the ultimate acquirer.

When doing that exercise, it becomes important to decide which transactions form part of the relevant arrangement and whether any of them are no more than incidental. If a step is truly incidental, it may be left out of account. But section 75B(2) draws a line: some transactions are too closely connected to the transfer of the chargeable interest to be treated as incidental.

The source material is dealing with that boundary. It identifies transactions which, because of their role in bringing about the transfer, must remain in the analysis.

What the official source says

HMRC says that the following are not incidental transactions for the purposes of section 75B(2):

• a transaction that is part of a series of transactions required for the chargeable interest to be transferred
• a transaction that is, or forms part of, the process by which the chargeable interest is transferred
• a transaction where the transfer of the chargeable interest is conditional on that transaction being completed
• a scheme transaction specifically included by section 75A(3)

The manual also explains that, when looking at these categories, the transfer of the chargeable interest from the vendor to the purchaser includes both:

• the disposal of a chargeable interest by the original owner, and
• the acquisition by the ultimate purchaser of that interest, or of an interest derived from it.

HMRC’s practical conclusion is that if a transaction falls within one of those categories, the consideration given for that step cannot be disregarded when calculating the chargeable consideration for the notional land transaction.

What this means in practice

The main practical point is that a taxpayer cannot argue that a key step in the transfer chain should be ignored simply because it looks administrative, intermediate, or commercially convenient. If that step is necessary to make the land transfer happen, is part of the transfer process, or must happen before the transfer can complete, it is not incidental under section 75B(2).

That can increase the amount treated as consideration for the notional land transaction. In turn, that may increase the SDLT charge under the section 75A rules.

This is especially relevant in arrangements involving multiple contracts, sub-sales, assignments, options, novations, funding steps, or intermediary entities. The legal form of each step still matters, but the question here is functional: what role did the step play in getting the chargeable interest from the original owner to the ultimate acquirer?

The reference to an interest “deriving from” the original interest is also important. The rule is not limited to a simple direct transfer of exactly the same legal estate. It can still apply where the purchaser ends up with an interest that comes out of the original interest rather than being identical to it.

How to analyse it

A sensible way to approach this point is to ask the following questions.

• What is the chargeable interest that started with the original owner?
• Who disposed of that interest, and who ultimately acquired that interest or an interest deriving from it?
• What transactions took place in between?
• Was a particular step required as part of the series of transactions needed to get the interest transferred?
• Was that step part of the actual transfer process, rather than something genuinely collateral?
• Could the transfer have happened without that step, or was completion of the transfer conditional on it?
• Is the step one of the scheme transactions specifically brought in by section 75A(3)?

If the answer to any of those points indicates that the step was integral to the transfer, the safer reading of the source material is that it is not incidental and its consideration must remain in the section 75A calculation.

The focus should be on the legal and practical necessity of the step, not merely on how the parties described it.

Example

Suppose an owner agrees to dispose of land, but the land does not pass directly to the eventual purchaser. Instead, there is a series of linked steps involving an intermediate party, and one of those steps must be completed before the purchaser can obtain the land interest. If that intermediate step is required for the transfer to happen, or if the transfer is conditional on that step being completed, section 75B(2) indicates that the step is not incidental. The consideration given for it cannot simply be ignored when working out the consideration for the notional land transaction under section 75A.

This example is illustrative only. The actual application depends on the precise facts and on whether the wider conditions for section 75A are met.

Why this can be difficult in practice

The source material gives categories, but applying them can still be fact-sensitive.

First, there may be disagreement about whether a step was truly required for the transfer, or whether it was merely part of the parties’ chosen structure. Some steps may be commercially convenient without being legally necessary. Others may be legally indispensable even if they appear minor.

Secondly, the phrase “forms part of the process” is broad. It suggests that the enquiry is not limited to strictly dispositive documents. Steps that are woven into the mechanics of the transfer may still be caught.

Thirdly, conditionality can be straightforward in formal contractual terms, but less clear where completion depends on linked arrangements, undertakings, or coordinated closings.

Finally, this page sits within a wider anti-avoidance code. Whether a step is not incidental under section 75B(2) is only one part of the overall analysis. It does not by itself answer every question about whether section 75A applies, but it does affect how the notional transaction is computed if the section is engaged.

Key takeaways

• A transaction cannot be treated as incidental if it is required for the transfer, forms part of the transfer process, or must be completed before the transfer can happen.
• If section 75B(2) applies to a step, the consideration for that step must be included in calculating the chargeable consideration for the notional land transaction.
• The analysis turns on the role the step played in transferring the chargeable interest from the original owner to the ultimate purchaser, including where the purchaser acquires an interest derived from the original interest.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Section 75B(2) FA03: Transactions Not Considered Incidental for Charge

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