SDLT on sub sales and transfers of rights

Q: What mistakes come up most often?

The original buyer files nothing. Relief has to be claimed on a return, so the original buyer on a sub sale or assignment should file and claim code 34 rather than assume no return is due. Leaving out the assignment fee. On an assignment of rights the end buyer is taxed on the original price plus the fee paid to the original buyer, not the original price alone. The general rules on what counts are in SDLT chargeable consideration. Wrong vendor on the end buyer's return. The original seller is generally the vendor, not the intermediate buyer. Connected party sub sales at an undervalue. The minimum consideration rule lifts the figure back up. Assuming older planning still works. Sub sale relief is now blocked where the sub sale is exempt under the alternative finance rules, and the anti avoidance rule in section 75A can override the result of a series of steps. See SDLT anti avoidance under section 75A. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

When a buyer who has exchanged contracts assigns the contract to someone else, or sells the property on before completing, Schedule 2A to the Finance Act 2003 decides who pays Stamp Duty Land Tax and on what. The end buyer pays SDLT on everything it gives, under the original contract and for the assignment or sub sale, while the original buyer is treated as making its own acquisition but can usually claim full relief on its SDLT return. That relief is lost if the original contract was already substantially performed or if avoiding SDLT was a main purpose.

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What counts as a sub sale or transfer of rights for SDLT?

HMRC calls these deals pre completion transactions. The rules are in section 45 of and Schedule 2A to the Finance Act 2003 and apply to pre completion transactions entered into on or after 17 July 2013 (SDLTM21510). The starting point is a contract for a property purchase that is to be completed by a conveyance. Before that original contract is substantially performed or completed, the buyer under it enters into a further agreement under which another person becomes entitled to call for the conveyance of all or part of the property.

The original buyer is called the transferor and the end buyer the transferee. Paragraph 2 of Schedule 2A splits these deals into two types:

Assignment of rights. The end buyer becomes entitled to exercise the rights under the original contract. The seller transfers straight to the end buyer.
Free standing transfer. Everything else, in practice mainly sub sales (the original buyer contracts to sell to the end buyer) and novations (the end buyer replaces the original buyer as party to the contract).

Paragraph 3 makes clear that the end buyer does not make a separate taxable acquisition just because it enters into the pre completion transaction. Its tax arises when the original contract is completed or substantially performed in its favour.

How is the end buyer taxed on an assignment of rights?

Under paragraph 4, the end buyer’s chargeable consideration is whatever it gives under the original contract plus whatever it pays for the assignment. The vendor shown on its return is generally the original seller (paragraph 8). If only part of the property is assigned, paragraph 7 treats the original contract as two contracts, one for the assigned part and one for the rest.

HMRC’s own example at SDLTM21590 shows the effect. A contracts to sell to B for £1 million. B assigns its rights to C for £100,000. C completes and pays A £1 million. C files a return on £1.1 million with A as vendor. B is treated under paragraph 5 as making a notional acquisition on £1 million with the same effective date and files a return claiming full relief.

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How is a sub sale taxed?

A sub sale is a free standing transfer. Paragraph 9 adds any consideration given for the pre completion transaction itself to what the end buyer otherwise pays, and paragraph 10 makes the original seller the vendor on the end buyer’s return. The original buyer is not given a notional transaction: its own contract simply completes, so it makes an ordinary acquisition under section 44 and needs relief to avoid paying tax on it (SDLTM21550).

In HMRC’s example at SDLTM21600, A contracts to sell to B for £1 million and B contracts to sell the same property to C for £900,000. Both sales complete at one meeting. If B and C are unconnected and acting at arm’s length, B files a return on £1 million and claims full relief, and C files a return on £900,000 showing A as vendor.

A novation is different again. Because no acquisition is made by the original buyer, it has nothing to report and no relief to claim (SDLTM21550).

What relief does the original buyer get?

Paragraph 15 gives relief for the original buyer on an assignment of rights, and paragraph 16 gives relief on a qualifying sub sale. The conditions are specific:

For an assignment, the original contract must not have been substantially performed when the assignment was entered into.
For a sub sale, the sub sale must be performed at the same time as, and in connection with, the original contract. Relief is not available if the original contract had already been substantially performed when the sub sale was agreed, or if the sub sale is exempt under the alternative finance rules in sections 71A to 73.
Where only part of the property is passed on, relief is partial: the original buyer is taxed on the part of its consideration that relates to the property it keeps.
Under paragraph 18, relief is barred if the deal forms part of tax avoidance arrangements, meaning it is reasonable to conclude that obtaining a tax advantage was a main purpose of the original buyer. HMRC notes that tax here means SDLT only (SDLTM21570).

Relief must be claimed in an SDLT return or an amendment to one, using relief code 34. An amendment can be made within 12 months of the filing date (SDLTM21570), and the return itself is due within 14 days of completion. See SDLT return deadlines and penalties and amending an SDLT return.

When does the minimum consideration rule increase the tax?

Paragraphs 12 to 14 contain a minimum consideration rule. It applies only where the end buyer is connected with, or not acting at arm’s length from, the original buyer (or an earlier transferor in a chain). HMRC says it can be ignored for most transactions (SDLTM21560).

Where it applies, the end buyer’s consideration becomes the highest of three figures: the amount found under the normal rules, the first minimum amount (generally the price due under the original contract) and the second minimum amount (the total of the net amounts given by each party). In the SDLTM21600 example, if B and C were connected, C’s consideration would rise from £900,000 to £1 million, because B paid A £1 million. This stops a connected sub sale at an undervalue from reducing the tax. It sits alongside the market value rule for transfers to a connected company.

Why does substantial performance by the original buyer break the relief?

Under section 44(5) a contract is substantially performed when the buyer, or a person connected with it, takes possession of the whole or substantially the whole of the property, or when a substantial amount of the price is paid. If the original buyer moves in, takes possession or pays most of the price before arranging the assignment or sub sale, its own contract is performed at that point and it has a chargeable acquisition. Paragraphs 15 and 16 then deny relief, so both the original buyer and the end buyer pay. Developers who take early access to a site for surveys or works need to check this carefully. See SDLT and substantial performance.

How does the end buyer register its title?

Section 79 prevents HM Land Registry registering most notifiable acquisitions without the SDLT5 certificate (SDLTM21580). On a sub sale there are usually two transfers, A to B and B to C. If B does not register, C sends its SDLT5, its application and both transfers, together with written confirmation (from C, or from B or B’s agent) that B acquired and transferred the property under a free standing transfer for the purposes of Schedule 2A. On an assignment of rights there is a single transfer from A to C, and C registers with only its own SDLT5; no confirmation letter is needed.

What mistakes come up most often?

The original buyer files nothing. Relief has to be claimed on a return, so the original buyer on a sub sale or assignment should file and claim code 34 rather than assume no return is due.
Leaving out the assignment fee. On an assignment of rights the end buyer is taxed on the original price plus the fee paid to the original buyer, not the original price alone. The general rules on what counts are in SDLT chargeable consideration.
Wrong vendor on the end buyer’s return. The original seller is generally the vendor, not the intermediate buyer.
Connected party sub sales at an undervalue. The minimum consideration rule lifts the figure back up.
Assuming older planning still works. Sub sale relief is now blocked where the sub sale is exempt under the alternative finance rules, and the anti avoidance rule in section 75A can override the result of a series of steps. See SDLT anti avoidance under section 75A.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.