Freeports and Investment Zones: Alternative Finance Relief and SDLT Provisions Explained

Freeports and Investment Zone relief in alternative finance arrangements

Where land in a special tax site is bought through an alternative finance arrangement, such as a bank buying first and then leasing or selling to the customer, SDLT relief is judged by the customer’s position rather than the bank’s. The customer is the “relevant person” for deciding if freeports relief or investment zone relief applies and, if the conditions later stop being met, the customer is also the person who must pay any SDLT due.

• These rules apply where a financial institution buys land as part of an SDLT alternative finance arrangement and then leases or transfers it to the customer.
• For freeports relief and investment zone relief, HMRC looks at the customer’s intended and actual use of the land, not the financial institution’s.
• The “relevant person” is the person other than the financial institution who entered into the finance arrangement.
• Relief can be claimed on the first transaction if the relevant person meets the conditions, including qualifying use of the land in the special tax site.
• If the qualifying conditions later stop being met, the relief may be withdrawn and the relevant person must file any further return and pay the SDLT due.
• In practice, advisers need to consider both the alternative finance rules and the separate freeports or investment zone relief rules together.

Scroll down for the full analysis.

Freeports and Investment Zones relief in alternative finance arrangements

This page explains how freeports relief or investment zone relief works where land is bought using an alternative finance arrangement, such as a bank buying the land first and then leasing or re-selling it to the customer. The key point is that, for these reliefs, the tax position turns on the customer’s circumstances and use of the land, not the bank’s.

What this rule is about

SDLT has special rules for certain alternative finance arrangements. These are designed to deal with structures where a financial institution acquires land and then either leases it to the customer or transfers it on to the customer as part of the financing arrangement.

Freeports relief and investment zone relief are targeted reliefs. They depend on conditions being met, including conditions about how the land is intended to be used and, in some cases, whether that qualifying use continues for a required period.

Without a special rule, there could be a mismatch in alternative finance cases because the legal buyer in the first transaction is often the financial institution, while the person who will actually occupy and use the land is the customer. Paragraph 11 of Schedule 6C addresses that problem.

What the official source says

The official material says that paragraph 11 of Schedule 6C supplements the general SDLT rules on alternative finance in section 71A and section 73 of Finance Act 2003.

Its effect is that, when deciding whether freeports relief or investment zone relief is available, and whether that relief is later withdrawn, HMRC looks at the circumstances of the “relevant person” rather than the financial institution.

For this purpose, the “relevant person” is the person, other than the financial institution, who entered into the alternative finance arrangement.

The source also says that if relief is later withdrawn, the liability to pay the SDLT falls on that relevant person, not on the financial institution.

What this means in practice

In an alternative finance structure, the bank or other financial institution may be the buyer in the first land transaction. But for freeports relief or investment zone relief, that does not mean the bank’s intentions, activities, or status are the real focus.

Instead, the practical question is whether the customer, as the relevant person, meets the conditions for the relief.

This matters in two ways.

First, when relief is claimed on the first transaction, eligibility is tested by reference to the relevant person. So the claim depends on what that person intends to do with the land in the special tax site.

Second, if the land later stops being used in the qualifying way, the withdrawal of relief is also tested by reference to the relevant person’s circumstances. If the conditions cease to be met, the relevant person must make the further return and becomes liable for the SDLT that then falls due.

So although the financial institution may be the party making the initial acquisition, it is not the institution that carries the substantive relief conditions for these purposes. The customer effectively stands in the foreground for eligibility and clawback.

How to analyse it

When looking at a freeports or investment zone case involving alternative finance, it helps to ask the questions in this order.

• Is this an arrangement within the SDLT alternative finance rules, such as a purchase by a financial institution followed by a lease or re-sale to the customer?
• Is the land in a special tax site so that freeports relief or investment zone relief is potentially in point?
• Who is the “relevant person”? This will be the person other than the financial institution who entered into the arrangement.
• At the time of the claim, does that relevant person satisfy the conditions for the relief, including the intended qualifying use of the land?
• After completion, does the relevant person continue to meet any ongoing conditions so that relief is not withdrawn?
• If relief is withdrawn, has the relevant person made the required further return, and is the SDLT calculated by reference to the chargeable consideration for the relieved transaction?

This framework shows why conveyancers and taxpayers should not stop at identifying the legal purchaser. In these cases, the important factual enquiry is usually what the customer intends to do, and later actually does, with the land.

Example

A bank buys land in a special tax site for £2,000,000 under an alternative finance structure and leases it to the customer. The customer intends to use all the land in a qualifying manner. On that basis, freeports relief or investment zone relief is claimed for the first transaction, and the customer claims the relevant alternative property finance relief on the second transaction.

If, after 12 months, the customer stops using the land in a qualifying manner, the relief on the first transaction is withdrawn. The customer, as the relevant person, must make the further return and is liable for the SDLT due on the £2,000,000 transaction.

This example shows the central point: the bank was the buyer in the first transaction, but the customer’s use of the land determines both the availability of relief and the later clawback.

Why this can be difficult in practice

The legal ownership structure and the tax analysis do not line up neatly in these cases. A reader may assume that because the bank acquired the land, the bank’s position controls the relief. The source makes clear that this is not how these relief provisions work.

There can also be practical difficulty in identifying exactly when qualifying use ceases, especially where only part of the land changes use, use changes gradually, or the factual position is mixed. The source example deals with a simple case where all the land stops being used in a qualifying manner. More complex facts may require careful analysis of the detailed relief conditions and withdrawal rules.

Another point that can be missed is that there may be two separate SDLT rule sets operating together: the special relief for freeports or investment zones, and the separate alternative finance provisions. The official material says paragraph 11 supplements the general alternative finance rules. That means the reader must consider both sets of provisions together, not in isolation.

Key takeaways

• In alternative finance cases, freeports relief and investment zone relief are tested by reference to the customer, not the financial institution.
• If relief is later withdrawn, the customer as the “relevant person” is the one who must account for the SDLT.
• The critical practical issue is the relevant person’s intended and actual qualifying use of the land in the special tax site.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Freeports and Investment Zones: Alternative Finance Relief and SDLT Provisions Explained

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