Read the original guidance here:
HMRC SDLT: SDLTM30100 – Application: Linked transactions FA03/S108

Understanding Linked Transactions in Stamp Duty

What are Linked Transactions?

Linked transactions are transactions that are part of the same scheme or arrangement involving the same buyer and seller or people associated with them. The definition of ‘connected persons’ is set out in the Corporation Tax Act 2010, specifically in Section 1122.

Examples of Linked Transactions

Consider a situation where a vendor is selling a house along with its gardens. If the husband buys the house, and the wife purchases the gardens, these transactions are considered linked. In this case, the amount of tax owed will be calculated based on the total price paid for both the house and the gardens.

Determining if Transactions are Linked

Whether transactions are linked is determined by the circumstances surrounding them. Buyers should carefully look into all the facts leading to these transactions before they complete their land transaction return. It’s important to note that if a transaction occurs between the same buyer and seller, that alone does not guarantee that the transactions are linked. However, if the transactions are part of a broader agreement, they will be considered linked.

Exchanges of Properties

If two parties, let’s say A and B, exchange properties, the acquisition of property by A and the acquisition by B are not considered linked, even if A and B are connected persons. This is unless all transactions took place before 19 July 2007.

Separate Documentation of Transactions

The way transactions are documented does not decide whether they are linked. For instance, if transactions are recorded with separate contracts, that does not stop them from being linked. If there are arrangements in place that indicate the transactions are part of the same deal, they will still be treated as linked.

What is a Series of Transactions?

A series of transactions goes beyond just one transaction following another. There must be additional factors that connect the transactions. It is essential to determine whether purchases are completely independent from one another. Buyers need to consider if the terms of the second transaction were influenced by the first transaction.

Tax Implications of Linked Transactions

When transactions are linked, such as a grant of an option followed by its exercise, additional tax may be owed for the first transaction. This extra tax is due at the same time as the tax for the second transaction, as referenced in FA03/S81A.

Reporting Linked Transactions

If linked transactions share the same effective date, the buyer has the option to report them as one single transaction. This means completing just one land transaction return. When this is chosen, all transactions will count as one, and all buyers involved will be treated as joint purchasers. For details, refer to SDLTM31600.

Final Thoughts on Linked Transactions

Understanding linked transactions is essential for buyers and sellers to ensure compliance with tax regulations. It is advisable to seek guidance or expert advice if there is any uncertainty about how transactions are linked.