Sub-sale relief is one of the most over-claimed and least understood SDLT provisions in UK property tax. Property forums and aggressive scheme promoters repeatedly suggest that section 45 Finance Act 2003 can be used to "wash" an existing portfolio into a limited company without paying SDLT. It cannot. The relief is narrowly targeted at pre-completion transfers of contractual rights, and it does nothing for someone who already owns the property.
This page is a clarification piece. It sets out what section 45 actually does, where it genuinely helps (off-plan assignments, developer-to-final-buyer chains), the connected-party minimum consideration rule that defeats most engineered structures, and the anti-avoidance landscape that closes off the schemes promoters still occasionally pitch.
What section 45 FA 2003 actually covers
Section 45 of the Finance Act 2003, supplemented by Schedule 2A FA 2003, deals with a narrow category of arrangement called a "pre-completion transaction". The defining feature is that the original buyer under a contract for the sale of land transfers their interest in that contract to a third party before completion of the original contract.
The relief collapses what would otherwise be two SDLT charges (one on the original buyer, one on the new buyer) into a single charge on the ultimate purchaser. Without the relief, B would pay SDLT on the A-to-B contract and C would pay SDLT on the B-to-C contract, even where only one transfer of property actually occurred.
Three flavours of pre-completion transaction sit within Schedule 2A:
| Type | What happens | SDLT outcome with relief |
|---|---|---|
| Assignment | B assigns their contractual rights under the A-to-B contract to C. B remains party to obligations; rights move to C. | B claims relief on the A-to-B return; C files for the consideration B would have paid (plus any assignment premium). |
| Sub-sale (true) | B contracts to sell to C before completing with A. A then transfers the property directly to C, bypassing B's legal title. | B claims relief on the A-to-B return; C files for the chargeable consideration on the B-to-C contract. |
| Novation | Tripartite agreement that cancels the A-to-B contract and creates a fresh A-to-C contract. B drops out entirely. | B has no SDLT liability because there is no acquisition; C files for the A-to-C consideration. |
In every case, the precondition is that the relief operates before the original buyer has substantially performed the A-to-B contract. Section 44 FA 2003 deems substantial performance to trigger the effective date of the transaction. Once B has taken possession or paid most of the price, B has acquired the chargeable interest and s.45 cannot retrospectively undo that acquisition.
The incorporation myth: why s.45 will not move your portfolio SDLT-free
The persistent misunderstanding is roughly this. An individual landlord owns five buy-to-let properties personally. They want the properties to sit inside a limited company they control. They have read on a forum that "sub-sale relief can be used to transfer the properties to the company without paying SDLT". The reasoning runs: the landlord sells to the company, the company is the buyer, sub-sale relief collapses the chain.
This does not work, for a straightforward reason. There is no chain. Section 45 collapses a chain of pre-completion contracts where the same property is moving from A through B to C without B ever completing. In the landlord scenario, the landlord is not party to any incomplete contract; they already own the properties outright. The sale to their own company is a single, fresh land transaction by the company, on which SDLT is due in full. The 5% additional dwellings surcharge applies because the company is acquiring residential property, the 15% non-natural person rate at over £500,000 may apply unless property letting relief is claimed, and (where the landlord is non-resident) the 2% non-resident surcharge piles on top.
The route that does work for retrofit incorporation is paragraph 10 of Schedule 15 FA 2003: partnership incorporation. Where a portfolio is held by a genuine pre-existing letting partnership (with partnership returns, partnership banking, joint borrowing) and is transferred to a connected company in exchange for shares, the connected-party formula reduces the chargeable consideration to nil. That is a different statutory route, with different evidential demands, and it requires a real partnership history. It is not, and never has been, sub-sale relief.
The minimum consideration rule
Even where a genuine pre-completion arrangement exists, s.45(3) FA 2003 closes off the obvious next gambit: structuring the prices so that the sub-purchaser pays SDLT on a depressed figure.
The rule is that where the original buyer (B) and the sub-purchaser (C) are connected, or are not acting at arm's length, the chargeable consideration on C's transaction is the higher of (a) the price C actually pays under the B-to-C contract, or (b) the price B would have paid under the A-to-B contract.
The effect is simple. A sells to B for £1.5 million. B is the sibling of C. B assigns the contract to C for £1.2 million. C pays SDLT on £1.5 million, not £1.2 million. The relief still works (B has no SDLT liability under s.45) but the minimum consideration rule defeats the depressed-price gambit. The rule applies whether or not A is connected; only the B-to-C relationship matters.
Anti-avoidance: where HMRC has won
For more than a decade, sub-sale relief was at the centre of mass-marketed SDLT avoidance schemes. The typical structure routed an ordinary purchase through a layer of pre-completion contracts engineered to look like a sub-sale, sometimes involving an artificially low intermediate price, an offshore vehicle, or a circular set of options. HMRC challenged consistently and almost always won.
The leading authorities include Project Blue Ltd v HMRC [2018] UKSC 30 (Supreme Court), which addressed alternative finance arrangements layered with sub-sale provisions, and the DV3 / Vardy Properties line, which closed off the use of unit-trust sub-sale schemes. The published HMRC view sits in the SDLT Manual at SDLTM01060 to SDLTM01160.
Section 75A FA 2003, the SDLT general anti-avoidance rule, gives HMRC a broad sweep where a scheme produces a tax saving that Parliament cannot have intended. Tribunals consistently apply s.75A to defeat sub-sale schemes that have no genuine commercial purpose beyond saving SDLT. If a promoter offers an SDLT saving on a straight residential purchase routed through "sub-sale relief", the realistic expectation is that the scheme fails on enquiry, leaving the taxpayer with the full SDLT, repayment interest, and tax-geared penalties.
Where sub-sale relief genuinely helps
The relief works as intended in three recurring situations.
Off-plan flat assignments. A buyer reserves an off-plan flat from a developer for £450,000, expecting to live in it. By the time completion approaches, their circumstances have changed and they assign the contract to another buyer for £475,000. Provided the assignor has not substantially performed (no possession, no large pre-payment), s.45 means the assignor has no SDLT liability and the sub-purchaser pays SDLT on the £475,000 they pay. Section 44 timing is the single most important variable here.
Developer-to-end-buyer chains. A property trader contracts to acquire a development site, intending to flip it on rather than complete. Before completion, they find an end-buyer and assign the contract. s.45 prevents a double SDLT charge along the chain.
Genuine novation in distressed deals. An off-plan buyer cannot complete (e.g. mortgage offer withdrawn after exchange) and the developer agrees to a tripartite novation that puts a substitute buyer into the contract. The original buyer drops out entirely under s.44(9) and recovers any SDLT already paid.
Worked example: off-plan flat assignment
To make the mechanics concrete, consider Marcus, who exchanged contracts on an off-plan one-bedroom flat in central Manchester in June 2025 for £315,000. Completion was scheduled for November 2026 when the development would be finished. Marcus paid a 10% deposit (£31,500) on exchange. In September 2026 he is offered a corporate relocation to Dubai and decides he no longer wants the flat. He finds a buyer, Priya, who is willing to take the contract for £325,000 (a £10,000 premium).
| Marcus (assignor, B) | Priya (assignee / sub-purchaser, C) | |
|---|---|---|
| Position at exchange | Holds A-to-B contract for £315,000; 10% deposit paid | Not yet in the picture |
| September 2026 assignment | Assigns contract to Priya for £10,000 premium | Pays Marcus £10,000; assumes A-to-B contract obligations |
| Substantial performance test | Has not taken possession or paid most of the price (only 10% deposit); s.45 available | Will substantially perform on November 2026 completion |
| SDLT position (assuming Priya is unconnected and a first-time buyer) | Claims s.45 sub-sale relief on the A-to-B return; £0 SDLT liability | SDLT on £325,000 (assignment payment plus £315,000 purchase price) on completion; first-time buyer relief if eligible |
Two things change the analysis. If Priya were Marcus's sister, the minimum consideration rule in s.45(3) would still tax her on the higher of £325,000 or what Marcus would have paid, which is £315,000 plus the £10,000 premium routed differently; the figures coincide and there is no engineered saving. If Marcus had moved into the flat under a "licence to occupy" pre-completion arrangement, he would have substantially performed and s.45 would be unavailable; both transactions would attract SDLT.
Documentary trail HMRC expects on a sub-sale claim
Sub-sale relief is not granted simply by writing "sub-sale relief claimed" on the SDLT return. HMRC's enquiry pattern on s.45 claims is to look behind the form and test whether the pre-completion arrangement was genuine and whether substantial performance occurred before the assignment. The documentary package that survives that enquiry typically includes:
- The original A-to-B sale and purchase agreement, dated and signed.
- The exchange deposit receipts and bank evidence that no further substantial pre-completion payment was made.
- The assignment deed or novation agreement, dated, with all three parties identified.
- Evidence that no possession was taken (no licence to occupy, no keys handed over, no utility transfer in B's name).
- The B-to-C consideration figure, supported by bank evidence of the assignment payment if any.
- Where B and C are connected, evidence of the relationship and of the price (so that the minimum consideration rule can be applied transparently).
- Both SDLT returns (B's claim for relief, C's substantive return).
Absence of any of these makes the claim harder to defend. Retroactive document preparation after the assignment looks like exactly that and weighs against the claim under enquiry. The 4-year HMRC enquiry window from the effective date is the period over which this file should be kept.
Common misconceptions to avoid
Beyond the incorporation myth, three further misconceptions recur on property forums and in scheme marketing.
"Sub-sale relief works on any purchase if you route through a holding company first." No. Where the holding company is connected to the ultimate buyer and the only purpose of the intermediate step is to depress SDLT, the minimum consideration rule applies and s.75A FA 2003 closes the structure as avoidance. The relief assumes a genuine commercial reason for the pre-completion arrangement.
"Sub-sale relief covers gifts to family." No. A gift to a family member is not a pre-completion sub-sale; it is a separate transaction with its own SDLT consequences. Where the gifted property is mortgaged, the assumption of debt by the donee is chargeable consideration; the recipient pays SDLT on the outstanding mortgage balance.
"Sub-sale relief can be claimed retrospectively on a completed purchase." No. Once B has substantially performed (taken possession or paid most of the price), the A-to-B transaction is a completed land transaction and B's SDLT crystallises. A subsequent sale by B to C is then a fresh, separate transaction with no s.45 relevance.
The link to ATED and CGT
Where the sub-purchaser is a corporate vehicle and the unit is worth over £500,000, the acquiring company falls into ATED unless it claims a relief (property letting relief is the usual one for buy-to-let landlords). Sub-sale relief does not avoid the ATED return obligation; the company still files an ATED return by 30 April in the year of charge, claiming the relief on the return.
On the CGT side, the assignor's £10,000 assignment premium is a capital receipt in their hands and forms a CGT disposal. The £3,000 annual exempt amount may cover it, but anything above the AEA is taxed at 18% / 24% (residential property rates from 30 October 2024). The relief that closes off the SDLT charge does not close off the assignor's CGT exposure.
Internal links and further reading
- The SDLT six-dwellings rule (s.116(7) FA 2003) , the route that actually does cut SDLT on a bulk acquisition of six or more units.
- SDLT on transferring an existing portfolio to a company , partnership incorporation under Sch 15 para 10 is the real retrofit route.
- 5% SDLT surcharge refund claim process , for individual buyers replacing a main residence.
- HMRC SDLT Manual (SDLTM01060 onwards for sub-sale relief).
- HMRC SDLT calculator , useful for sense-checking the sub-purchaser's SDLT on a clean assignment.