Guide to Alternative Property Finance and Tax Relief in the UK and Wales

Alternative property finance relief during the SDLT to LTT change in Wales

Alternative property finance relief is designed to stop qualifying multi-step funding arrangements being taxed more heavily than a normal mortgage-funded purchase. Where a Welsh arrangement began before 1 April 2018 under SDLT and later steps happened after LTT started, transitional rules can prevent an extra LTT charge on a later step, but any post-1 April 2018 LTT filing requirements must still be met.

• These rules apply to qualifying alternative property finance arrangements, which may involve several linked land transactions instead of a standard interest-bearing mortgage.
• The aim is to align the tax result with what would usually happen if the buyer had used an ordinary mortgage, so the extra steps do not create extra stamp tax.
• For Wales, 1 April 2018 is the key date: earlier steps may fall under SDLT, while later steps may fall under LTT.
• If the first transaction happened before 1 April 2018 and qualified for SDLT relief, transitional rules may stop the later “third transaction” in the arrangement from being charged to LTT.
• Relief depends on the arrangement fitting the statutory rules and on the earlier SDLT conditions having been met; it is not available for every similar-looking finance structure.
• Even where relief applies, LTT returns must still be filed with the Welsh Revenue Authority for later transactions that fall within LTT.

Scroll down for the full analysis.

Alternative property finance: how SDLT and LTT relief works across the Wales transition

This page explains how tax relief works where a property purchase is funded through an alternative property finance arrangement rather than a conventional interest-bearing mortgage. The source material deals in particular with the transition from SDLT to LTT in Wales on 1 April 2018, and how the rules are intended to prevent extra tax arising simply because the financing is structured in this way.

What this rule is about

Alternative property finance rules exist because some financing structures do not use a standard loan with interest. Instead, they may involve a series of linked land transactions. Without specific relief, those extra steps could trigger more than one charge to stamp tax, even though the commercial aim is broadly similar to an ordinary financed purchase.

The legislation referred to in the source is designed to avoid that result. In broad terms, it aims to make sure that the stamp tax outcome for a qualifying alternative property finance arrangement is aligned with the outcome for a buyer who funds the purchase with a normal mortgage.

The source refers to section 71A and section 73 of Finance Act 2003 for SDLT, and to Schedule 10 to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act for LTT.

What the official source says

The official material says that sections 71 and 73 of Finance Act 2003 provide relief where a purchase is funded by an alternative property finance arrangement. The purpose is to ensure that the SDLT payable is in line with the SDLT that would have been payable if the buyer had used an interest-bearing mortgage.

It also says that equivalent relief exists for LTT in Wales under Schedule 10 to the Welsh legislation.

The important transitional point is this: where a party entered into an alternative property finance arrangement before 1 April 2018, regulation 5 of the Land Transaction Tax (Transitional Provisions) (Wales) Regulations 2018 prevents the third transaction described in section 71A FA 2003 from being charged to LTT. This is intended to stop a taxpayer being disadvantaged merely because the arrangement began under SDLT but later steps happened after LTT replaced SDLT in Wales.

The source gives a specific example of how this works. If the first transaction took place before 1 April 2018, so it fell under SDLT, and if it met the conditions for SDLT relief, then later transactions within the same alternative finance arrangement that took place on or after 1 April 2018 can qualify for relief under the LTT rules. In that case, LTT returns must be made to the Welsh Revenue Authority.

What this means in practice

The practical point is that a qualifying alternative property finance arrangement may involve more than one land transaction, but the tax system is intended to avoid charging those steps as if they were separate ordinary purchases.

For Wales, the transition date of 1 April 2018 matters. If an arrangement started before that date, SDLT may apply to the earlier step. If later steps happened after that date, LTT may apply instead. The transitional regulations are there to stop the change in tax regime creating an extra charge on the later step simply because the arrangement spans both systems.

This does not mean that no filing is needed. The source expressly says that where the later transactions occur on or after 1 April 2018, relief may be available under the LTT rules, but returns must still be made to the Welsh Revenue Authority.

So, in practice, you need to distinguish between:

• whether the arrangement is one that falls within the alternative property finance rules at all,
• which transaction happened before and after 1 April 2018, and
• whether the conditions for relief were met at the earlier SDLT stage.

How to analyse it

A sensible way to analyse a case is to work through the arrangement step by step.

• Identify whether the funding structure is an alternative property finance arrangement covered by the relevant legislation.
• Map the sequence of transactions. The source refers specifically to the “third transaction” in section 71A FA 2003, so the order of events matters.
• Check the date of the first transaction. If it was before 1 April 2018 and the land was in Wales, SDLT may have applied at that stage.
• Check whether the first transaction met the conditions for SDLT relief. The transitional protection described in the source depends on that point.
• Identify whether later transactions took place on or after 1 April 2018. If they did, LTT may be the relevant tax for those steps.
• Consider whether the transitional regulation disapplies LTT on the third transaction described in section 71A.
• Even where relief is available, check the filing position. The source makes clear that LTT returns must be made to WRA for later transactions falling within LTT.

This is mainly an exercise in classification and timing. The tax treatment depends not just on what happened, but when each step happened and whether the arrangement satisfied the statutory conditions from the outset.

Example

Illustration: a buyer in Wales enters into a qualifying alternative property finance arrangement in March 2018. The first transaction takes place before 1 April 2018, so it falls under SDLT. The conditions for SDLT relief are met at that stage. A later transaction in the same arrangement takes place in April 2018, after LTT has replaced SDLT in Wales.

Under the source material, the later step can fall to be dealt with under the LTT rules, and the transitional regulations are intended to prevent the third transaction in the section 71A structure from being charged to LTT. Even so, an LTT return must still be made to WRA for the post-1 April 2018 transaction.

Why this can be difficult in practice

The source material is short and assumes the reader already understands the structure of section 71A arrangements. In practice, the difficult issues are often:

• whether the financing arrangement truly falls within the statutory alternative property finance rules, rather than merely resembling them commercially,
• which step in the arrangement is the “first”, “subsequent”, or “third” transaction for legal purposes,
• whether the conditions for relief were actually satisfied at the SDLT stage before 1 April 2018, and
• how to handle compliance where the arrangement spans two tax regimes.

The transitional rule described in the source is protective, but it is not a free-standing relief for any multi-step financing arrangement. It depends on the arrangement fitting the statutory model and, in the example given, on the first transaction having qualified for SDLT relief. If that earlier condition was not met, the position may be different.

Key takeaways

• Alternative property finance relief is intended to stop qualifying financing structures from suffering more stamp tax than an ordinary mortgage-funded purchase.
• In Wales, special transitional rules protect arrangements that began before 1 April 2018 from an extra LTT charge on the later section 71A transaction.
• Relief does not remove filing obligations: where later steps fall under LTT, returns must still be made to the Welsh Revenue Authority.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide to Alternative Property Finance and Tax Relief in the UK and Wales

View all WRA LTT Guidance Pages Here