Must an SDLT1 be filed to claim relief for pre-completion transactions?

“Could you ask the SDLT expert if where a buyer assigns a contract to a secondary buyer and that buyer completes, if the first buyer has to submit an SDLT return and claim relief.  For the avoidance of doubt, this is not a situation where the first buyer completes and immediate sells on to a second buyer it is just an assignment of the contract where the first buyer takes the profit and walks away. I believe they have to submit an SDLT return within a year of the completion of the contract rather than the assignment of the contract. I can’t find definitive advice and HMRC have failed to reply to me.”

Source: BLG Member

 


Relief should be available for the first buyer under paragraph 15 Schedule 2A FA 2003.  This relief has to be claimed (paragraph 15(2)) by completing an SDLT return (paragraph 15(4)).  The relevant relief code is code 34 once you have answered ‘yes’ to Q9.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

 

“So we have to submit an SDLT return even though we have assigned the contract and never completed?”

 

Yes – here is the long answer which explains why:

TRANSACTIONS ENTERED INTO BEFORE COMPLETION OF CONTRACT

The rules covering these transactions were in section 45 FA 2003 and the intermediate transactions to which the provision applied were referred to as `transfers of rights’. The FA 2013 replaced the old provisions with a much longer and more complicated set of rules (new Schedule 2A FA 2003).

In outline the new rules retain the scope of qualifying transactions which fell within old section 45 (and include novations of contracts) and rename them `pre-completion transactions’. Schedule 2A draws a distinction between two types of qualifying transaction – assignments of contracts (‘assignments of rights’) and everything else, including sub-sales (`free-standing transfers’).

Under paragraph 5 of Schedule 2A, the original purchaser in an assignment of rights is treated as making a separate acquisition under a notional land transaction with an effective date that is the same as the effective date for the transferee’s (assignee’s) land transaction. The chargeable consideration for that notional land transaction is equal to the total amount of any consideration given (directly or indirectly) by the original purchaser or transferee (or in either case a person connected with them) as consideration under the original contract. However, provided that he (the original purchaser) does not substantially perform the original contract before the assignment of rights, the original purchaser (and each transferor in a series of assignments) may claim relief in respect of his acquisition under the relevant notional land transaction (paragraph 15 Schedule 2A). Relief must be claimed in a land transaction return or an amendment of such a return as explained in my earlier answer.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

 

“I don’t think many solicitors realise this and is may come as a shock to them. I believe you have a year to submit the return.”

 

You have 30 days from the effective date of the transaction to submit a return. There are penalties for late returns. A return can be amended or corrected within a year and 30 days of the effective date.

At the time of publication this response was correct however as tax legislation and practice change from time-to-time you should take specific advice before taking any action.

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