Stamp duty where a connected company takes over a land deal
Connected-company land deals
HMRC’s example shows that a connected company taking over a land deal for £900,000 may have SDLT calculated using the original £1 million contract price.
- The £1.1 million market value does not apply on HMRC’s stated facts.
- The connection between B and C is the key reason for the £1 million result.
- The effective date and documents must be checked in a real case.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty where a connected company takes over a land deal
A company cannot always use a lower price to cut its stamp duty bill when it takes over a land deal from a connected company. In HMRC’s example, the later company agrees to pay £900,000. Yet SDLT uses £1 million instead.
What this rule is about
This example concerns a sale that changes hands before it completes. A agrees to sell land to B for £1 million. B later makes a deal for connected company C to take the land instead.
At first sight, C’s £900,000 price looks decisive. It is not. The connection between B and C changes the result.
What the official source says
HMRC’s manual gives a worked example, rather than a general promise that every similar arrangement gets the same result. It says both B and C have SDLT consequences when the two agreements complete together and as part of the same arrangement.
- A agrees to sell the land to B for £1 million.
- The £1 million price matches the land’s market value when A and B make their agreement.
- One year later, the land’s market value has risen to £1.1 million.
- B agrees that C will take the land for £900,000.
- C is connected with B.
- Both agreements complete at the same time and in connection with each other.
HMRC says B faces SDLT on its purchase, although B can claim the relief that applies under the subsale rules. HMRC also says C has its own SDLT position.
For C, the starting figure is £900,000: the price in B and C’s agreement. The special market-value rule does not raise that figure to £1.1 million, because the seller for C’s purchase counts as A, not B, for this purpose.
That is not the end of it. Since B and C are connected, HMRC says the minimum-price rule raises C’s figure from £900,000 to £1 million.
What this means in practice
The important comparison is not simply between C’s price and the latest market value. You must also compare the connected companies’ deal with the amount in the original contract, because that earlier amount can set a floor.
So a falling price within a group does not necessarily reduce SDLT. The paperwork may show £900,000, while the tax calculation uses £1 million.
- Do not assume the later contract price settles the SDLT figure.
- Check whether the companies are connected.
- Keep the original contract as well as the later agreement.
- Check whether both deals complete as one linked arrangement.
- Separate the market-value question from the connected-company minimum-price question.
How to analyse it
Start with the chain of events. Who agreed to buy first, who ultimately received the land, and what did each agreement say?
Then test the points that matter in order. A small change in the facts can change the answer, especially where the parties are not connected or the deals do not complete together.
- Identify the original seller, original buyer, and final company.
- Record the price in the original contract.
- Record the price in the later agreement.
- Establish whether the companies are connected under the relevant legal test.
- Check when each agreement was made and completed.
- Check whether the completion steps formed one arrangement.
- Consider the market-value rule separately.
- Apply the minimum-price rule if the connection requirement is met.
Example
Here is HMRC’s illustration. A agrees to sell land to B for £1 million, with completion planned two years later. After one year, the land is worth £1.1 million. B agrees that connected company C will take the land for £900,000.
Both agreements complete together. HMRC starts C’s SDLT figure at £900,000. It does not substitute the £1.1 million market value. But the connection between B and C raises C’s figure to £1 million, the price in A and B’s original agreement.
The increase is £100,000. The example does not provide an SDLT rate, so it does not calculate the tax due.
Why this can be difficult in practice
People often focus on the £1.1 million valuation and miss the separate rule that matters here. That valuation does not set C’s figure in HMRC’s example. The earlier £1 million contract does.
Connection is also a legal question, not a label the companies choose for themselves. Ownership, control, and the exact parties to each agreement can matter greatly.
- A lower later price does not automatically mean lower SDLT.
- A higher market value does not automatically replace the agreed price.
- Completing on the same day may matter, but the documents must show the required connection between the deals.
- HMRC’s manual explains its view; the legislation remains the law.
Key takeaways
- A connected company may face SDLT using the original contract price.
- In HMRC’s example, £900,000 rises to £1 million.
- Check the contracts, connection, timing, and law in force on the effective date.
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 — rules for transfers of rights and subsales
- FA 2003 Schedule 2A para 1 — tax treatment and relief for the original buyer
- FA 2003 Schedule 2A para 9 — working out the later buyer’s taxable price
- FA 2003 Schedule 2A para 10 — connected-company minimum price and market-value exception
- FA 2003 Schedule 4 para 1 — what counts as the amount paid for land
- FA 2003 section 53 — market-value rule for connected company purchases
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 official example does not explain why A and C are not connected, beyond saying that the market-value rule does not apply.
- The supplied statutory library identifies Schedule 2A but does not contain its full text. The wording in force on the effective date should be checked before relying on this example in a live case.
- The example does not give enough facts to calculate the SDLT bill or confirm whether B’s relief would be available in a real case.
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 original sale contract between A and B.
- The later agreement between B and C.
- Completion statements and documents showing how the two deals connect.
- Records establishing whether B and C are connected.
- Evidence of the amounts each party agreed to pay.
- The effective date and the statutory wording then in force.
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 where a connected company takes over a land deal [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 - rules for transfers of rights and subsales https://www.legislation.gov.uk/ukpga/2003/14/section/45/2025-11-17 - FA 2003 Schedule 2A para 1 - tax treatment and relief for the original buyer https://www.legislation.gov.uk/ukpga/2003/14/schedule/2A/paragraph/1/2025-11-17 - FA 2003 Schedule 2A para 9 - working out the later buyer's taxable price https://www.legislation.gov.uk/ukpga/2003/14/schedule/2A/paragraph/9/2025-11-17 - FA 2003 Schedule 2A para 10 - connected-company minimum price and market-value exception https://www.legislation.gov.uk/ukpga/2003/14/schedule/2A/paragraph/10/2025-11-17 - FA 2003 Schedule 4 para 1 - what counts as the amount paid for land https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/1/2025-11-17 - FA 2003 section 53 - market-value rule for connected company purchases https://www.legislation.gov.uk/ukpga/2003/14/section/53/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm21670 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 official example does not explain why A and C are not connected, beyond saying that the market-value rule does not apply. - The supplied statutory library identifies Schedule 2A but does not contain its full text. The wording in force on the effective date should be checked before relying on this example in a live case. - The example does not give enough facts to calculate the SDLT bill or confirm whether B's relief would be available in a real case. 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 where a connected company takes over a land deal
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