Stamp duty on an exchange subsale: HMRC’s Plot 1 and Plot 2 example
Exchange subsales in brief
HMRC’s example shows that a plot-for-plot deal can create separate SDLT calculations. The amount used can be the market value of the plot received, rather than the cash and land figure alone.
- B’s Plot 2 figure is £500,000, not its £400,000 market value.
- C’s Plot 1 figure is £1 million, not £900,000.
- The result depends on the connected contracts and the law in force at the time.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on an exchange subsale: HMRC’s Plot 1 and Plot 2 example
Stamp duty on an exchange subsale: the Plot 1 and Plot 2 example
If a plot is passed on as part of a deal for another plot, stamp duty can arise on more than one purchase. HMRC’s example shows why the cash figure alone may not decide the bill. Market value can matter more.
What this rule is about
Some land deals are not simple sales for cash. Where a buyer agrees to sell on the first plot while taking another plot as part of the price, the arrangement may involve more than a cash payment. It can be an exchange subsale.
That can look like one commercial arrangement. For SDLT, the law can treat the land transfers separately. This matters because each transfer needs its own amount for tax purposes.
HMRC calls its example an exchange subsale. It involves three people: A owns Plot 1, B agrees to buy it, and C later takes Plot 1 from B.
What the official source says
When HMRC’s manual considers contracts that complete at the same time and are connected with each other, it uses an example where B agrees to buy Plot 1 from A for £1 million. B pays a £500,000 deposit.
B then agrees to provide Plot 1 to C. In return, C gives B £500,000 in cash and Plot 2, worth £400,000. Plot 2 is useful to B for commercial reasons.
- Section 47 treats the exchanges as distinct land transactions.
- B is taxed on buying Plot 1 from A, although HMRC says B can claim relief.
- B is also taxed on buying Plot 2 from C.
- C is taxed on buying Plot 1 from B.
For B’s purchase of Plot 2, HMRC compares two figures. One is Plot 2’s market value of £400,000. The other is £500,000: the part of Plot 1’s value fairly assigned to Plot 2.
The larger figure is £500,000. That is the amount used for B’s purchase of Plot 2 in HMRC’s example.
For C’s purchase of Plot 1, the ordinary calculation gives £900,000. That is the £500,000 cash plus the £400,000 value of Plot 2. Yet Plot 1 is worth £1 million.
HMRC therefore uses £1 million. In this kind of exchange, the higher figure wins.
What this means in practice
Although you might think the amount paid is simply the cash plus the plot handed over, that approach may not be enough where the exchange rule applies and market value is relevant. It is not always enough.
Where the exchange rule applies, the market value of the plot you receive can increase the amount used for SDLT. That difference is £100,000 in C’s part of HMRC’s example, but the source gives no SDLT rate calculation and therefore does not show the final tax bill. No final bill is shown.
- Do not assume that a low cash payment produces a low SDLT figure.
- Value both plots, even if the contracts give them different prices.
- Record why any value has been split between cash and land.
- Keep the documents showing how the linked contracts fit together.
How to analyse it
Start with the actual steps, not the label used for the deal. What happens on paper, and when, decides whether this is an exchange and subsale arrangement.
- Identify who buys and sells each plot.
- Check whether one purchase is made in return for another sale.
- Check whether the contracts complete together and are connected.
- List every part of the deal: cash, deposits, land and anything else given.
- Obtain evidence of each plot’s market value.
- For each purchase, compare the normal amount paid with the market-value figure required by the exchange rule.
- Check whether the middle buyer has a relief claim and its separate conditions.
What actually decides the amount? For this example, it is the higher of two figures. That is the point people can miss when they focus only on the cash changing hands.
Example
Using HMRC’s figures, B buys Plot 1 for £1 million. B then receives £500,000 and Plot 2, worth £400,000, from C.
For B’s purchase of Plot 2, HMRC tests the £400,000 market value against the £500,000 attributed to it from Plot 1 before selecting the amount to use. HMRC uses £500,000.
C’s normal amount is £900,000: £500,000 cash plus Plot 2 at £400,000. Since Plot 1 is worth £1 million, HMRC uses £1 million for C instead.
The same deal therefore has different figures for the two buyers because they are buying different plots under separate transactions, even though the arrangements are connected. That is not a mistake.
Why this can be difficult in practice
The difficult part is often not the arithmetic. It is deciding whether the agreements are truly connected, and whether the values used are sound.
Although a contract may describe separate prices for each part of a wider bargain, that description does not settle the issue where one amount relates to more than one matter. A fair and reasonable split is required.
- A deposit does not by itself show the full value of what B gives or receives.
- A commercially useful plot may have a value different from the parties’ preferred figure.
- Separate contracts can still form one connected arrangement.
- The source does not explain B’s relief, so do not assume relief is automatic.
- The date matters because rules for subsales have changed over time.
HMRC’s manual explains its own view of this fact pattern. It is useful guidance, but it is not the law itself.
Key takeaways
- An exchange subsale can create separate SDLT purchases.
- Market value may override the amount the parties appear to have paid.
- Check the transaction date, the connected contracts and any relief carefully.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 45 — treatment of transfers of rights before completion
- FA 2003 section 47 — separate tax treatment for exchanges of land
- FA 2003 Schedule 2A para 9 — exchange rules for certain pre-completion transactions
- FA 2003 Schedule 4 para 1 — what counts as payment for a land deal
- FA 2003 Schedule 4 para 4 — fair division of payment between connected matters
- FA 2003 Schedule 4 para 5 — how payment is worked out for exchanges
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The source does not give the transaction date. The treatment of subsales must be checked against the law in force on that date.
- It is not possible from the example alone to confirm whether B’s relief claim succeeds or how it must be made.
- A fair split of value may be disputed where the agreements do not state clear values.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The signed sale, subsale and transfer documents.
- Completion statements and proof of every cash payment.
- Evidence of the market value of each plot at the relevant time.
- Evidence showing why the contracts were connected and completed together.
- The effective date and details of any relief claimed by the middle buyer.
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty on an exchange subsale: HMRC's Plot 1 and Plot 2 example [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 45 - treatment of transfers of rights before completion https://www.legislation.gov.uk/ukpga/2003/14/section/45/2025-11-17 - FA 2003 section 47 - separate tax treatment for exchanges of land https://www.legislation.gov.uk/ukpga/2003/14/section/47/2025-11-17 - FA 2003 Schedule 2A para 9 - exchange rules for certain pre-completion transactions https://www.legislation.gov.uk/ukpga/2003/14/schedule/2A/paragraph/9/2025-11-17 - FA 2003 Schedule 4 para 1 - what counts as payment for a land deal https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/1/2025-11-17 - FA 2003 Schedule 4 para 4 - fair division of payment between connected matters https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/4/2025-11-17 - FA 2003 Schedule 4 para 5 - how payment is worked out for exchanges https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/5/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm21660 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The source does not give the transaction date. The treatment of subsales must be checked against the law in force on that date. - It is not possible from the example alone to confirm whether B's relief claim succeeds or how it must be made. - A fair split of value may be disputed where the agreements do not state clear values. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty on an exchange subsale: HMRC’s Plot 1 and Plot 2 example
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