Alternative Finance Bonds: SDLT and LTT Exemptions for Welsh Land Transactions

Alternative finance investment bonds and the SDLT to LTT change in Wales

For Welsh land transactions linked to alternative finance investment bonds, 1 April 2018 is the key date. Transactions effective before that date may qualify for SDLT relief, while transactions on or after that date fall outside SDLT because LTT applies instead. Special transitional rules can stop a later second transaction from being charged to LTT, but SDLT can still arise later on an earlier first transaction if its original relief is withdrawn.

• Before 1 April 2018, Welsh land transactions were within SDLT; from that date, they moved to LTT.
• A pre-1 April 2018 first transaction may be exempt from SDLT if the statutory conditions are met.
• If relief on that first transaction is later withdrawn, SDLT can still become payable even if the withdrawal happens after 1 April 2018.
• A second transaction effective before 1 April 2018 may also be exempt from SDLT if the relevant conditions are satisfied.
• A second transaction effective on or after 1 April 2018 is not subject to SDLT, and transitional Welsh rules may also prevent an LTT charge where the arrangement began before that date.
• When reviewing a case, check the land is in Wales, identify whether it is a first or second transaction, confirm the effective date, and then test the relevant relief and transitional conditions separately.

Scroll down for the full analysis.

Alternative finance investment bonds and the SDLT to LTT transition in Wales

This page explains how stamp tax relief works for certain land transactions linked to alternative finance investment bonds in Wales, especially where the transaction falls around 1 April 2018, when Welsh land transactions moved from SDLT to LTT. The main point is that some transactions completed before that date could still benefit from SDLT relief, and special transitional rules prevent some later follow-on transactions from being taxed again under LTT.

What this rule is about

Alternative finance investment bonds are dealt with for SDLT purposes by section 73C Finance Act 2003 and Schedule 61 Finance Act 2009. The source material focuses on how those rules apply to land in Wales when the tax system changed.

Before 1 April 2018, SDLT applied to Welsh land transactions. On and after 1 April 2018, LTT applied instead. That creates a timing issue for arrangements involving more than one transaction, especially where the first step happened before 1 April 2018 and the second step happened later.

The rules are designed to avoid unfair results during that changeover. In particular, they deal with whether relief is available under SDLT for pre-April 2018 transactions, whether SDLT can later become payable if relief is withdrawn, and whether a later “second transaction” can escape LTT where the arrangement began before the switch to LTT.

What the official source says

The official material draws a distinction between a “first transaction” and a “second transaction” under Schedule 61 Finance Act 2009.

If a Welsh land transaction is a first transaction for the purposes of paragraph 6 of Schedule 61, it is exempt from SDLT if:

• its effective date is before 1 April 2018, and
• the conditions for the relief are met.

However, if that relief is later withdrawn, SDLT becomes chargeable under paragraph 7(3) of Schedule 61. The source makes clear that this can happen even if the withdrawal takes place on or after 1 April 2018.

If a Welsh land transaction is a second transaction for the purposes of paragraph 8 of Schedule 61, it is exempt from SDLT if:

• its effective date is before 1 April 2018, and
• the conditions in paragraph 8 are met.

If either kind of transaction has an effective date on or after 1 April 2018, it is not subject to SDLT.

The source also states that equivalent relief exists under LTT in Schedule 11 to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act. In addition, regulation 6 of the Land Transaction Tax (Transitional Provisions) (Wales) Regulations 2018 prevents a second transaction from being charged to LTT where:

• the arrangement was entered into before 1 April 2018, and
• the conditions in paragraph 8(1)(a) and (b) of Schedule 61 Finance Act 2009 are met.

This transitional protection is there so that a party is not disadvantaged simply because the second step in the arrangement happens after Wales moved from SDLT to LTT.

What this means in practice

The practical starting point is timing. For Welsh land transactions, 1 April 2018 is the key dividing line.

If the transaction was effective before that date, SDLT may still be relevant. If it was effective on or after that date, SDLT does not apply to that transaction.

For a first transaction completed before 1 April 2018, SDLT relief may apply at that time. But that does not always end the SDLT analysis. If the relief is later withdrawn, SDLT can still become payable under the SDLT legislation, even though Wales has by then moved to LTT. In other words, the later withdrawal does not prevent an SDLT charge from arising if the original transaction was one to which SDLT applied.

For a second transaction, the position is slightly different. If the second transaction took effect before 1 April 2018 and the relevant conditions were met, it could be exempt from SDLT. If the second transaction took effect on or after 1 April 2018, it is not subject to SDLT. But that does not automatically mean LTT will apply. The transitional regulations can switch off an LTT charge for that second transaction where the statutory conditions are satisfied.

The overall effect is to preserve the intended relief across the change from SDLT to LTT, rather than allowing the tax system change itself to create an extra charge.

How to analyse it

A sensible way to analyse a case is to work through these questions in order.

• Is the land in Wales?
• Is the transaction connected with an alternative finance investment bond within the legislation?
• Is the transaction being tested a first transaction under paragraph 6, or a second transaction under paragraph 8, of Schedule 61 Finance Act 2009?
• What is the effective date of that transaction?
• If the effective date is before 1 April 2018, were the statutory conditions for SDLT relief met?
• If it is a first transaction, has anything happened that causes the relief to be withdrawn under the legislation?
• If it is a second transaction taking effect on or after 1 April 2018, do the transitional LTT regulations prevent an LTT charge?

It is important not to collapse these questions into one. The tax result may depend on both the type of transaction and the date it became effective.

It is also important to distinguish between:

• the original availability of SDLT relief on a pre-1 April 2018 transaction,
• a later SDLT charge if that relief is withdrawn, and
• whether a later second transaction is protected from LTT by the transitional rules.

Example

Illustration: a party enters into an arrangement involving Welsh land that falls within the alternative finance investment bond rules. The first transaction has an effective date in March 2018. If the statutory conditions are met, that first transaction can be exempt from SDLT.

Later, a second transaction takes place in April 2018. Because its effective date is after 1 April 2018, it is not subject to SDLT. The next question is whether LTT applies. If the conditions referred to in regulation 6 of the Welsh transitional regulations are met, the second transaction is not charged to LTT either.

But if the relief on the first transaction is later withdrawn, SDLT can still become chargeable on that first transaction under paragraph 7(3), even though the withdrawal happens after 1 April 2018.

Why this can be difficult in practice

The main difficulty is that three separate legal layers are interacting:

• the SDLT rules in Finance Act 2003 and Schedule 61 Finance Act 2009,
• the LTT relief in Schedule 11 to the Welsh Act, and
• the Welsh transitional regulations.

That means a reader has to be careful not to assume that one answer applies to every step in the arrangement.

A further difficulty is that the source material does not set out the underlying conditions in paragraph 6, paragraph 8, or Schedule 11 in full. So whether relief is available in a particular case still depends on the detailed statutory requirements being satisfied.

Another point that can cause confusion is the difference between a transaction not being subject to SDLT because of its date, and a transaction being exempt from SDLT because relief applies. Those are not the same thing. A pre-1 April 2018 transaction may be exempt under SDLT relief provisions. A post-1 April 2018 Welsh transaction falls outside SDLT because LTT has replaced it. That distinction matters when considering later withdrawal of relief and transitional protection.

Key takeaways

• For Welsh land, 1 April 2018 is the key date for deciding whether SDLT can apply at all.
• A first transaction completed before that date can still give rise to SDLT later if the original relief is withdrawn.
• A second transaction taking effect after that date may be protected from LTT by the Welsh transitional rules, so the move from SDLT to LTT does not create an extra tax charge by itself.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Alternative Finance Bonds: SDLT and LTT Exemptions for Welsh Land Transactions

View all WRA LTT Guidance Pages Here