Example 9: Land Acquisition by Connected Company with Market Value Considerations

SDLT subsale relief and connected companies

Where land is bought and resold before completion, SDLT can work differently from the contract prices alone. In HMRC’s example, the intermediate buyer may claim subsale relief, but the onward buyer, being a company connected with that buyer, is still chargeable to SDLT. Although the onward buyer agreed to pay £900,000 and the land was worth £1.1 million at completion, the connected company rules mean SDLT is charged on £1 million instead.

• A agrees to sell land to B for £1 million, and before completion B agrees to pass it on to connected company C for £900,000.
• Because the contracts complete together, the subsale rules apply and B may be chargeable in principle but able to claim relief.
• C is separately chargeable to SDLT, with the starting figure under the subsale rules being the £900,000 it agreed to pay.
• HMRC says the market value rule does not increase C’s SDLT figure to the later value of £1.1 million on these facts.
• However, because B and C are connected, a minimum consideration rule increases C’s chargeable consideration from £900,000 to £1 million.
• The correct approach is to test the facts in sequence: identify the subsale, check how completion happens, then apply any market value and connected party rules in turn.

Scroll down for the full analysis.

SDLT subsale relief and connected companies: why the buyer’s tax can be based on a higher figure

This page explains an HMRC example about a subsale where land is bought and resold before completion, and the onward buyer is a company connected with the intermediate buyer. The point matters because, even where the onward buyer agrees to pay less, SDLT may still be charged on a higher amount under the connected company rules.

What this rule is about

The example deals with a common SDLT structure in principle: A agrees to sell land to B, but before completion B enters into a further agreement to pass the land on to C. The transactions then complete together.

In SDLT terms, that raises two separate questions:

• Is B still treated as making a land transaction, even though the property is passed on to C?
• What amount is C taxed on if C is connected with B and pays less than the amount under the original contract?

The example shows how subsale relief can apply to B, but still leave C chargeable. It also shows that special rules can prevent connected parties from reducing the SDLT charge simply by setting a low onward price.

What the official source says

HMRC’s example uses these facts:

• A contracts to sell land to B for £1 million.
• The £1 million reflects market value when that contract is made.
• Completion is due two years later.
• After one year, the market value has risen to £1.1 million.
• B then enters into a subsale with C for £900,000.
• C is a company connected with B.
• Both contracts complete at the same time and in connection with each other.

HMRC says:

• B is chargeable on its acquisition, but can claim relief.
• C is chargeable on its acquisition.
• For C, the starting point is that the chargeable consideration under the subsale rules is £900,000.
• The market value rule in section 53 does not apply to increase that figure to £1.1 million, because for this purpose the vendor on C’s acquisition is treated as A rather than B.
• However, because B and C are connected, the minimum consideration rule applies and increases C’s chargeable consideration to £1 million.

What this means in practice

The practical result is that C does not pay SDLT on the current market value of £1.1 million, but C also cannot rely on the reduced onward price of £900,000. Instead, C is taxed on £1 million.

This reflects two different rules working together:

• First, the subsale rules alter how the onward transaction is treated.
• Second, the connected company rule can impose a minimum figure for chargeable consideration.

The example is useful because it shows that these rules do not all point in the same direction. One rule prevents the consideration being uplifted to current market value. Another rule still increases it above the actual amount paid.

So, where an onward buyer is a company connected with the intermediate buyer, the amount actually paid under the subsale may not be the final SDLT figure.

How to analyse it

A sensible way to analyse a case like this is to work through the transactions in stages.

1. Identify whether there is an original contract and a later subsale before completion.

   The example assumes B contracted with A first, then entered into a further agreement with C before the original contract completed.

2. Check whether the transactions complete at the same time and in connection with each other.

   That is important because the subsale rules are engaged on the facts given.

3. Consider B’s position separately from C’s.

   HMRC’s example says B is chargeable on its acquisition but can claim relief. That means B is not simply ignored; rather, relief has to be considered under the relevant subsale provisions.

4. Work out C’s starting consideration under the subsale rules.

   On the example facts, that starting figure is the £900,000 payable by C.

5. Ask whether a market value rule overrides that figure.

   HMRC says section 53 does not do so here, because paragraph 10(4) means that, for C’s acquisition, the vendor is A. So the later market value of £1.1 million does not become the SDLT consideration on these facts.

6. Then ask whether there is a connected company minimum consideration rule.

   Because B and C are connected, HMRC says this rule applies and lifts C’s chargeable consideration from £900,000 to £1 million.

The key lesson is that the analysis is sequential. You do not jump straight to market value, and you do not stop at the amount actually paid. You must test the facts against each relevant rule in turn.

Example

Illustration based on the HMRC example:

A agrees to sell land to B for £1 million, with deferred completion. Before completion, B arranges for the land to go to its connected company, C, for £900,000. By then the land is worth £1.1 million. All steps complete together.

On those facts:

• B may have an SDLT charge in principle, but HMRC says relief is available.
• C has its own SDLT charge.
• C does not simply pay SDLT on £900,000.
• C is also not charged on the then market value of £1.1 million under section 53 on these facts.
• Instead, because C is connected with B, C’s chargeable consideration is increased to £1 million.

Why this can be difficult in practice

Subsale cases are often difficult because several deeming rules can affect who is treated as vendor, what counts as consideration, and whether relief is available. The answer may not follow ordinary contract language.

This example is also easy to misread in two ways.

• First, a reader might assume that because the property is worth £1.1 million at completion, SDLT must be charged on £1.1 million. HMRC’s example shows that this is not necessarily right.
• Second, a reader might assume that because C only pays £900,000, SDLT must be charged on £900,000. Again, the connected company rule prevents that result here.

The connected party analysis is therefore critical. So is identifying exactly which acquisition is being examined, because the relevant “vendor” for one rule may not be the person who appears to be selling under the immediate contract.

The source example is also limited to its own facts. It does not attempt to explain every possible subsale variation, and outcomes may differ if the parties are not connected, the completion mechanics differ, or a different anti-avoidance or market value rule is in point.

Key takeaways

• In a subsale, the onward buyer’s SDLT position must be analysed under the specific subsale rules, not just by looking at the onward contract price.
• A rise in market value before completion does not automatically mean SDLT is charged on that higher market value.
• If the onward buyer is a company connected with the intermediate buyer, a minimum consideration rule may increase the SDLT charge above the amount actually paid.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example 9: Land Acquisition by Connected Company with Market Value Considerations

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