Most property transactions follow a familiar route. A buyer contracts to purchase a property and later completes that same acquisition from the seller. SDLT becomes more complicated where the contractual position changes before completion, particularly where rights under the original contract are assigned to another party or a subsale takes place.
These arrangements can bring the pre completion transaction rules into play. Broadly, the rules are relevant where there is an original contract for a land transaction and, before that contract is completed or substantially performed, the original purchaser enters into another transaction under which somebody else becomes entitled to acquire all or part of the property.
The legislation distinguishes between different types of pre completion arrangement, including assignments of rights and other forms of transfer. The detailed treatment can therefore depend on how the transaction has been structured, what consideration is paid between the parties and whether the whole property or only part of it is involved.
A relatively simple example illustrates why the rules matter. A agrees to sell land to B for £1 million. Before completion, B assigns its contractual rights to C for £100,000 and C subsequently completes the acquisition from A. The SDLT analysis does not simply ignore B because C is the person who ultimately appears on the transfer. The pre completion rules determine the treatment of both transactions and can result in C’s chargeable consideration reflecting both the original purchase price and the amount paid for the assignment.
Subsales can create further complexity. Depending on the facts, relief may be available to the original purchaser where the statutory conditions are met, while different provisions apply where only part of the original property is transferred. There are also anti avoidance provisions which can restrict relief where a main purpose of the arrangements is to secure an SDLT advantage.
The practical difficulty is that the final transfer document may not reveal the whole SDLT position. To understand the transaction properly, it may be necessary to look at the original contract, any later assignment or subsale agreement, payments between the parties and the timing of each step.
For conveyancers acting on these transactions, early identification is therefore important. If contractual rights have changed hands before completion, it should not automatically be treated as a straightforward acquisition by the final purchaser. The SDLT treatment may need to be considered across the entire chain of transactions, and specialist advice can be valuable before the return is prepared and submitted.
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This article was submitted by Compass as part of an advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the advertiser and not those of Today’s Conveyancer.
