Is the purchase of adjacent land at a later date a linked transaction?

“I have been contacted by Mr and Mrs R who bought the property they now live in in March 2014 for £750,000.  The seller (Mr W) retained other land and as a result of the transaction, he and my clients became next-door neighbours. Mr W has now offered to sell to my clients a piece of land adjacent to the property they bought from him in 2014 for a further £58,000.  The land is a field currently used for agricultural purposes.  My clients say the land was not available for them to buy in March 2014.  They want to acquire it now to protect the boundary/outlook of their home.

I have been asked whether the acquisition of the field for £58,000 will be a linked transaction.  The parties are the same as those from March 2014.  I am not aware of any time limit after which a transaction between the same parties would cease to be regarded as a linked transaction.  Am I right?

The clients would have paid £30,000 Stamp Duty Land Tax on their house purchase at £750,000.  If the acquisition of the field is a linked transaction, please advise what additional SDLT would now be payable.  Would the fact that the field is non-residential property make any difference compared to what would be payable if it were residential property?”

Source: BLG Member

 


Transactions are ‘linked’ if they form part of a ‘single scheme, arrangement or series of transactions between the same vendor and purchaser or persons connected with them’ (section 108 FA 2003). ‘Arrangement’ is not defined. The mischief at which the provision is aimed is the artificial splitting up of one transaction into a number of smaller ones in order to take advantage of the lower rates of SDLT. The mere fact that transactions are between the same parties does not make them linked. The question to be answered is ‘are the transactions part of a single deal?’ You are correct that there is no time limit in section 108 but the time between the transactions will be a relevant factor in assessing whether they are linked.

There is a ‘series’ of transactions where the transactions are entered into sequentially and there is some integral connection or inter-dependence (see Attorney-General v Cohen [1937] 1 All ER 27). In the SDLT Manual (at SDLTM30100) HMRC refer to the requirement for something to connect the transactions before they can be a series for this purpose and go on:

‘It would be a question of fact whether purchases are totally unrelated. In particular the purchaser needs to consider whether the fact that the first transaction had happened had affected the terms of the second transaction’.

In this case I do not think that the two transactions are linked as there is no inter-dependence. As the consideration for the field is less than £150.000 there will be no SDLT charge. If the two transactions were linked, the transactions would be chargeable at the rate for land which is not wholly residential (in Table B in section 55) where the consideration is £808,000. This would be at the 2014 ‘non-residential’ rate for the house portion (4% which makes the SDLT £30,000 so there would be no extra tax to pay) and at the current rate (5%) for the field.

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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