HMRC SDLT: Guide to Transferor Relief for Land Transactions Under FA03/SCH2A

Relief for the Transferor in Land Transactions

Relief for the transferor in land transactions is governed by specific provisions in the Finance Act 2003, Schedule 2A. This relief can be claimed under certain conditions, primarily involving assignments of rights or subsales. The relief aims to alleviate the tax burden on the transferor when these conditions are met, but it is subject to strict rules and limitations.

• Relief is available for assignments and subsales, with specific provisions for each.
• For subsales, the original and subsale contracts must be completed or substantially performed simultaneously.
• Partial relief applies if only part of the land is involved in the assignment or subsale.
• Claims for relief must be made in a land transaction return or an amendment within twelve months of the filing date.
• Relief is denied if the main purpose of the transaction is to secure a tax advantage.
• Relief code 34 should be used when claiming this relief in the land transaction return.

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Relief for the Transferor

The relief available to the transferor is outlined in paragraphs 15-18 of FA03/SCH2A. This relief means that, under specific situations, a transferor can claim full relief on their land transaction. Here’s what you need to know about how this relief works, including the types of transactions involved and how to apply for it.

Types of Transactions

• The transferor can claim relief if the transaction before completion is either:
• An assignment of rights – This is when the transferor passes on their rights under a contract to another party.
• A subsale – This refers to a situation where the transferor sells their rights to another party, usually right after entering a previous contract.

What is a Subsale?

In a subsale, certain conditions must be met for the transferor to claim relief:

• The original contract must be mostly completed at the same time as the subsale. This means that the activities outlined in the original contract should be performed closely alongside the execution of the subsale contract.
• If the assignment or subsale involves only part of the land that was in the original contract, partial relief is still available.

Claiming the Relief

To claim this relief, the transferor must include it in a land transaction return. If needed, this can also be requested as a change to an already submitted return. It’s essential to remember these key points when making your claim:

• The request for relief must be submitted within twelve months from the date that the original return was filed. This is outlined in paragraph 6 of FA03/SCH10.
• When completing the land transaction return, ensure you enter relief code 34 in the designated box.

Restrictions on Relief

It is important to note that relief will be denied under certain circumstances:

• If it is reasonable to assume that the main intention of the transferor was to obtain a tax advantage for themselves or another person through this transaction, the claim for relief will not be accepted.
• For clarity, the term ‘tax advantage’ specifically relates to Stamp Duty Land Tax (SDLT) and does not cover other taxes.

Example of How to Apply for Relief

Let’s consider a practical example to illustrate how the relief for the transferor can work in real-life situations:

• Imagine a property developer enters into a contract to buy land.
• Before the deal is finalised, the developer finds another party who is interested in the same piece of land.
• The developer can then assign their rights from the original contract to this new buyer. If this assignment is done according to the rules described above, the developer could claim relief on the SDLT they would have otherwise owed.
• If the assignment involves the entire piece of land, they could claim full relief. If it only involves a part of the land, then partial relief might be possible.

Frequently Asked Questions

1. Can I claim relief if I only own part of the original contract?

Yes, you can apply for partial relief if the assignment or subsale involves only a part of the land under the original contract.

2. How do I know if I qualify for relief?

You need to assess whether your sale falls under an assignment of rights or a subsale and ensure the necessary conditions are met for the transaction to qualify for relief. Additionally, you should ensure that your primary aim is not to gain a tax advantage for any person.

3. What happens if I miss the twelve-month window for amending my land transaction return?

If you overlook this timeframe, you will not be able to amend your return and could miss out on claiming relief that you might have been entitled to.

4. Are there any specific forms I need to fill out for claiming this relief?

When making your claim, you will fill out a land transaction return and input relief code 34 in the specified area. Ensure all information is accurate and provided in a timely manner.

5. What if I have already claimed relief but need to amend the return?

If you have previously claimed relief and need to make changes, you can submit an amendment to your land transaction return before the twelve-month limit is reached.

In Conclusion

While we can’t sum up this guidance with a conclusion, it’s essential to be aware of these details regarding relief for the transferor and ensure that all information is correct and submitted in a timely manner. Remember to keep these points in mind when navigating land transactions to take full advantage of the available reliefs.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Guide to Transferor Relief for Land Transactions Under FA03/SCH2A

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