Exchanges

A land exchange occurs where a purchaser enters into one land transaction wholly or partly in consideration of entering into another land transaction as vendor.  Where the exchange provisions apply, both parties to the transaction pay SDLT on the market value of the interest which they receive (as opposed to any consideration which they pay).

The exchange provisions catch more transactions than would at first be anticipated.  For example, the rules can catch a 3 party exchange where a council grant a lease to a developer conditional on the developer granting an underlease to a third party.  Similarly, the grant of a lease to a tenant to build out a development with a reserve call option for the landlord to take the land back in the event of default could also be an exchange for SDLT purposes.

Exchanges are not always easy to spot, but result in a significantly altered SDLT analysis.  Restructuring a transaction to benefit from recognised SDLT reliefs and/or the re-ordering of transactions can avoid the imposition of a market value charge.

For more information please email jfeaster@edftax.co.uk or call 07526 003021 to speak to John.