Subsale Example: Minimum Consideration Rule for Connected and Unconnected Parties Explained

Subsale relief and the minimum consideration rule for SDLT

Where land is sold on before the first purchase completes, SDLT rules can stop the middle buyer being taxed twice by allowing subsale relief. However, if the middle buyer and final buyer are connected, the final buyer may be taxed on a higher amount than the price actually paid, because the minimum consideration rule can substitute a larger figure.

• A subsale happens when the first buyer enters into a further transaction over the same land before completion, so the final buyer ends up with the property.
• In HMRC’s example, A sells to B for £1 million, then B agrees to transfer to C for £900,000, with both steps completing together.
• If B and C are unconnected and acting at arm’s length, B can usually claim full subsale relief and C is taxed on £900,000.
• If B and C are connected, C’s SDLT consideration is the highest of the normal amount and two statutory minimum amounts, which increases C’s figure to £1 million in the example.
• For SDLT purposes, C’s vendor is treated as A, the original seller, not B, so the return must follow the statutory treatment rather than the cash flow.
• The outcome depends on the legal structure, whether subsale relief conditions are met, and whether the parties are connected.

Scroll down for the full analysis.

Subsale relief and the minimum consideration rule: when a later buyer pays less than the first contract price

This page explains an HMRC example of a subsale where land is sold on before completion. It shows two linked points. First, how subsale relief is intended to stop the middle buyer being taxed twice. Second, how special rules can increase the tax value of the final buyer’s purchase where the middle buyer and final buyer are connected.

What this rule is about

A subsale happens where a buyer agrees to buy land from the original seller, but before that purchase completes, the buyer enters into another transaction so that someone else ends up with the land. In SDLT, these arrangements are dealt with by the pre-completion transaction rules.

The main issue is identifying who is taxed, on what transaction, and on what amount of consideration. In a straightforward commercial subsale, the legislation is designed so that the middle buyer can usually claim relief, while the final buyer is taxed on its own acquisition.

But where parties are connected, the legislation contains a minimum consideration rule. Its purpose is to prevent the taxable consideration for the final buyer being reduced below an amount the legislation treats as appropriate.

What the official source says

The source example starts with these facts:

• A agrees to sell land to B for £1 million, payable on completion.
• Before completion, B agrees to transfer the same land to C for £900,000, also payable on completion.
• At one completion meeting, both transactions complete. C pays B £900,000 and B pays A £1 million.

HMRC treats this as a pre-completion transaction in the form of a free-standing transfer, not an assignment of rights. On these facts:

• the original contract is A to B,
• the original purchaser is B,
• the transferee is C, and
• the transferor is B.

HMRC’s intended outcome where B and C are unconnected and dealing at arm’s length is:

• B is treated as entering into a land transaction for £1 million, but can claim full subsale relief if the statutory conditions are met.
• C must file a land transaction return based on consideration of £900,000.

For C’s acquisition, the vendor is treated as A, not B, and the return should be completed on that basis.

If B and C are connected, HMRC says the minimum consideration rule applies. C’s chargeable consideration is then the greatest of:

• the amount otherwise worked out for C’s acquisition, here £900,000,
• the first minimum amount, here £1 million, being the amount due under the original A-B contract, and
• the second minimum amount, here also £1 million, being the total net consideration given by the relevant parties.

On the example figures, C’s consideration is therefore increased from £900,000 to £1 million.

What this means in practice

The practical effect is that the SDLT result depends heavily on whether the onward buyer is connected with the middle buyer.

If B and C are not connected and are acting at arm’s length, the legislation is intended to respect the commercial onward sale price of £900,000 for C’s acquisition. B is still within the SDLT machinery on the original £1 million contract, but subsale relief is intended to prevent a double charge on B.

If B and C are connected, the law does not simply accept the £900,000 onward price. Instead, it tests that figure against statutory minimum amounts. In the HMRC example, both minimum amounts come out at £1 million, so C is taxed as if the consideration were £1 million.

This matters because a reader might assume SDLT follows only the amount actually paid by C to B. In connected-party cases, that is not necessarily right. The legislation can substitute a higher figure.

It also matters for return preparation. Even though C pays B, HMRC says the vendor for C’s acquisition is A for these purposes, so the return needs to reflect the statutory treatment rather than the commercial flow of funds.

How to analyse it

A sensible way to analyse a case like this is to work through the following questions.

• Is there an original contract for the purchase of land that has not yet completed?
• Before completion, has the original purchaser entered into a further transaction relating to the same land?
• Is that further transaction a free-standing transfer, rather than an assignment of contractual rights?
• Who are the statutory parties: original seller, original purchaser, transferor and transferee?
• Does the middle buyer fall within the conditions for qualifying subsale relief?
• What is the consideration for the final buyer’s acquisition under the normal rules?
• Are the middle buyer and final buyer connected?
• If they are connected, what are the three figures required by the minimum consideration rule, and which is highest?
• Has the land transaction return been prepared on the correct statutory footing, including the correct vendor?

On the figures in the example, the computation for connected parties works like this:

• Normal consideration for C’s acquisition: £900,000.
• First minimum amount: £1 million, being the amount due under A’s contract with B.
• Second minimum amount: £1 million, made up of C’s net consideration of £900,000 plus B’s net consideration of £100,000.

The chargeable consideration is the highest of those amounts, so £1 million.

Example

Illustration: A agrees to sell a property to B for £1 million. Before completion, B agrees that C will take the property for £900,000. Both steps complete together.

If B and C are independent parties dealing commercially, HMRC’s example says B should file on the original transaction but claim full subsale relief, and C should file on £900,000.

If B and C are connected, C does not simply file on £900,000. The minimum consideration rule applies, and on these facts C is treated as giving £1 million of consideration. That higher amount is used for SDLT.

Why this can be difficult in practice

The legislation in this area is technical. Several points can affect the outcome.

• The result depends on the exact legal form of the pre-completion transaction. HMRC’s example is specifically a free-standing transfer, not an assignment of rights. A different structure may engage different provisions.
• Subsale relief is not automatic in every onward sale. HMRC’s example says B can claim relief because the transaction is a qualifying subsale and the relevant conditions are met. Those conditions still need to be checked.
• Whether parties are connected can be decisive. If they are connected, the minimum consideration rule may override the actual onward sale price.
• The statutory vendor for the final acquisition may not be the same as the person who receives the money in the commercial chain. That can make return completion counterintuitive.
• The second minimum amount requires a netting exercise across relevant parties. That calculation can become more complicated if there are more payments, more parties, or non-cash consideration.

The key practical difficulty is that the SDLT analysis does not follow only the visible money flow. It follows the statutory treatment of the chain of contracts and transfers.

Key takeaways

• In a subsale, the middle buyer may still be treated as entering into a land transaction, but qualifying subsale relief can remove the SDLT charge on that step.
• Where the middle buyer and final buyer are connected, the final buyer’s consideration may be increased under the minimum consideration rule.
• In HMRC’s example, the final buyer’s vendor is treated as the original seller, and the return should be completed on that statutory basis.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Subsale Example: Minimum Consideration Rule for Connected and Unconnected Parties Explained

View all HMRC SDLT Guidance Pages Here