Minimum Consideration Rule: Impact on Connected or Non-Arm’s Length Property Transactions

SDLT sub-sales: minimum consideration rule

This anti-avoidance SDLT rule can apply to some pre-completion land transactions, often called sub-sales, where the final buyer is connected with, or not dealing at arm’s length with, the seller or an earlier seller in the chain. In those cases, SDLT may be worked out on a higher statutory minimum amount instead of the lower price shown in the final step.

• The rule only applies to certain Schedule 2A pre-completion transactions, not to all ordinary sub-sales.
• You must check whether the ultimate purchaser is connected with, or not acting at arm’s length from, the transferor or any earlier transferor.
• If the rule applies, the normal SDLT consideration is compared with two minimum amounts: usually the original contract price and a separate formula-based amount.
• Where either minimum amount is higher than the normal consideration, SDLT is charged on that higher figure.
• In practice, this means a low or nominal price in the final transfer may be ignored for SDLT if the transaction chain involves connected or non-arm’s length parties.
• The analysis can be complex because it may require reviewing the whole transaction chain, the connected persons rules, and the statutory formula in paragraphs 12 to 14 of Schedule 2A.

Scroll down for the full analysis.

SDLT sub-sales: the minimum consideration rule

This page explains a specific anti-avoidance rule in the SDLT sub-sale provisions. It matters where land is bought and resold before completion, and the final buyer is connected with, or not dealing at arm’s length with, the original seller or another earlier seller in the chain. In those cases, SDLT may be charged on a higher amount than the price the final buyer appears to pay.

What this rule is about

Schedule 2A to Finance Act 2003 deals with pre-completion transactions, often called sub-sales. These are arrangements where rights under a land contract are transferred, or there are successive transactions, before the original purchase completes.

Normally, SDLT looks at the chargeable consideration actually given for the acquisition. But paragraphs 12 to 14 of Schedule 2A add a minimum consideration rule for certain cases. The purpose is to stop the final acquisition being taxed on an artificially low figure where the parties are connected or not dealing with each other on normal commercial terms.

The rule is not a general rule for all sub-sales. The HMRC manual makes clear that it only applies in a narrower class of cases. For most ordinary commercial transactions, it can be ignored.

What the official source says

The official material says the minimum consideration rule applies only where the ultimate purchaser is:

• connected with the transferor, or
• not acting at arm’s length from the transferor,

and, where there are successive pre-completion transactions, the same test can be applied by reference to any earlier transferor in the chain.

If the rule applies, the consideration for the ultimate purchaser’s acquisition may be increased. You do not simply use the amount produced by the normal SDLT consideration rules if that amount is lower than the statutory minimum.

The manual identifies two possible minimum amounts:

• the first minimum amount, which is generally the amount due under the original contract, and
• the second minimum amount, which is calculated by a formula taking into account the net amount given by each party to the transactions, subject to certain exceptions.

If either of those minimum amounts is higher than the consideration otherwise produced by the normal rules, the chargeable consideration is increased to that higher minimum amount.

What this means in practice

In practice, this rule can stop a final buyer from being taxed only on a reduced or nominal amount where the transaction chain has been structured between connected parties, or parties not dealing at arm’s length.

The key practical point is that the final SDLT calculation may not stop with the price stated in the ultimate transfer. If the relationship test is met, you must compare that figure with the statutory minimum amounts.

This can matter where:

• there is an original purchase contract at one price,
• rights are then assigned, redirected or otherwise dealt with before completion, and
• the final buyer is connected with, or not at arm’s length from, an earlier seller in the chain.

In that situation, the final buyer’s SDLT position may be based on a higher figure than the amount it appears to pay under the final step.

The manual does not set out the detailed formula on this page, but it signals an important point: the legislation can substitute a minimum value even where the ordinary consideration analysis would give a lower result.

How to analyse it

A sensible way to approach this issue is:

• Identify whether there is a pre-completion transaction within Schedule 2A. If there is no sub-sale or similar pre-completion arrangement, this rule will not be in point.
• Identify the ultimate purchaser. This is the person whose acquisition is being tested for SDLT.
• Map the transaction chain. Work out who the transferor is, and whether there are earlier transferors because of successive pre-completion transactions.
• Test the relationship. Ask whether the ultimate purchaser is connected with, or not acting at arm’s length from, the transferor or any earlier transferor.
• Apply the normal SDLT consideration rules first. The minimum consideration rule only matters if it would increase that amount.
• Compare the normal consideration with the two statutory minimum amounts.
• If one of the minimum amounts is higher, use the higher figure instead.

The two questions that usually matter most are:

• Does the relationship test bring the transaction within the rule at all?
• If it does, which minimum amount is higher than the normal consideration?

Example

This is only an illustration of how the rule operates in principle.

A seller agrees to sell land under an original contract. Before completion, rights under that contract are passed through further arrangements so that a different person becomes the ultimate purchaser. Under the final step, that ultimate purchaser appears to give relatively low consideration. If that ultimate purchaser is connected with the original seller, or is not acting at arm’s length from that seller, the normal low figure may not be enough for SDLT purposes.

You would then compare the normal consideration with:

• the amount due under the original contract, and
• the formula-based minimum amount based on the net amounts given by the parties, subject to the statutory exceptions.

If either minimum amount is higher, SDLT is charged on that higher amount.

Why this can be difficult in practice

The page is short, but the underlying legislation is not simple.

First, whether parties are connected is a legal question that depends on the statutory connected persons rules. Whether parties are not acting at arm’s length is also fact-sensitive and is not necessarily the same thing as being connected.

Second, in a chain of successive pre-completion transactions, it may not be enough to look only at the immediate seller and buyer in the final step. The rule can look back to an earlier transferor.

Third, the second minimum amount is formula-based and includes the net amount given by each party, with exceptions. That means the calculation may require a careful review of all amounts moving around the transaction structure, not just the headline price in one document.

Finally, the manual page summarises the rule rather than reproducing all of the legislative detail. So while it clearly identifies when the rule may apply and what it broadly does, the exact calculation still depends on paragraphs 12 to 14 of Schedule 2A.

Key takeaways

• The minimum consideration rule is a targeted SDLT rule for certain pre-completion transactions, not a rule for all sub-sales.
• It only applies where the ultimate purchaser is connected with, or not at arm’s length from, the transferor or an earlier transferor in the chain.
• If it applies, SDLT may be charged on a higher statutory minimum amount rather than the lower consideration produced by the normal rules.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Minimum Consideration Rule: Impact on Connected or Non-Arm’s Length Property Transactions

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