Read the original guidance here:
HMRC SDLT: SDLTM21540 – Paragraphs 4-8 – Assignments of rights

Guidance on Assignments of Rights

Overview of Pre-Completion Transactions

Paragraphs 4 to 8 of FA03/SCH2A focus on transactions that involve assigning rights before completion. This process often occurs when rights regarding a property are transferred from one party to another before the final completion of a contract.

Treatment of the Transferee (Paragraph 4)

When rights are assigned, the transferee is treated as follows:

– The transferee’s acquisition includes:
– What the transferee provides according to the original contract.
– Any additional payment made for the assigned rights.

– The vendor for the transferee’s acquisition is typically the original vendor from the initial contract. There are some exceptions to this rule, which are outlined in paragraph 8 below.

Introduction of Notional Land Transactions (Paragraph 5)

Paragraph 5 introduces the concept of ‘notional land transactions’ for the transferor when rights are assigned. Here’s how it works:

– Under sub-paragraph (1):
– A notional land transaction is created for the transferor when rights are transferred.

– If there are multiple transfers in succession (successive assignments):
– Each transferor involved creates another notional ‘additional land transaction’ in the chain (under sub-paragraph (2)).

– The consideration (the financial or other benefits) for a notional land transaction includes:
– Any payment made under the original contract, whether by the transferee or the transferor.
– For an additional land transaction, any payment made by the new purchaser in connection with the last assignment is also considered.

Implications of Rescinded Contracts (Paragraph 6)

If the original contract has been performed to a significant extent but is then rescinded (cancelled) or annulled (declared invalid), the transferee’s position is managed under existing rules found in section 44(9).

– Paragraph 6 includes similar provisions as outlined in paragraph 5 regarding the notional and additional land transactions.

Assignments Covering Only Part of the Land (Paragraph 7)

Sometimes, an assignment might involve only a portion of the land covered by the original contract. In these situations:

– The rules from paragraphs 4 and 5 still apply, but the original contract is treated as though it has been divided into two separate contracts:
– One contract for the land being assigned.
– Another contract for the remaining land not involved in the assignment.

Through understanding these paragraphs, parties involved in property transactions can better navigate the implications of assigning rights and the associated financial considerations that arise in such scenarios.