There are some situations when two or more property transactions that involve the same buyer and seller are treated as being linked for LBTT purposes (see LBTT4013 for further guidance on calculating the tax payable on linked transactions and where a LBTT return, or further return, may need to be made in consequence of a later linked transaction).
Amongst other things, this is an anti-avoidance measure to avoid transactions being artificially split up in the hope of reducing or eliminating the LBTT payable. People connected to a buyer or seller can count as being the same buyer or seller.
Section 1122 of the Corporation Tax Act 2010 applies to determine whether parties are ‘connected’.
If, for example, joint buyers structure a purchase in such a way that one of them buys the house and the other buys the gardens, these will be regarded as linked transactions. Tax is then charged on the linked transaction as if they were one transaction. The amount of tax charged will be determined by adding together the chargeable considerations paid for both the house and the gardens.
Two transactions involving the same buyer and seller are not necessarily linked. However, transactions are linked if they are part of a single scheme, arrangement or series of transactions (see below).
Land transactions involving exchanges of interests in land are not treated as linked transactions (see LBTT5002).
The buyer will need to consider all the circumstances surrounding potentially linked transactions before completing the LBTT return.
If two transactions are documented separately
The form in which the transactions are documented will not determine whether or not they are linked. For example, documenting transactions with separate contracts will not prevent them being linked if the transactions are in fact part of a single deal.
Series of transactions
A series of transactions means something more than one transaction following another. There must be something else to connect the transactions. In particular, the buyer needs to consider whether the fact that the first transaction had happened has affected the terms of the second transaction.
Where successive transactions are linked, for example the grant of an option and its exercise, additional tax may be due for the first transaction. Any additional tax is payable at the same time as tax is payable on the second transaction.
Two or more linked transactions with the same effective date
Linked transactions with the same effective date can be reported as a single notifiable transaction using a single LBTT return, if the buyer chooses to do so.
Where this is done, the transactions will be treated as a single transaction and all the buyers, if more than one, will be treated as joint buyers.