SDLTM16040 - Reliefs and Exemptions: Sale and leaseback arrangements
A sale and leaseback arrangement means an arrangement under
which:
- A transfers or grants to B a major interest in land, (the sale), and
- out of that interest B grants a lease to A (the leaseback).
Subject to the following qualifying conditions the leaseback element of a sale and leaseback arrangement is exempt from charge:
- the sale transaction must be entered into wholly or partly in consideration of the leaseback
- the only other consideration for the sale must be cash or the release or assumption of a debt (or both)
- that the sale is not a transfer of rights falling within the provisions of either S45 or S45A FA2003
- Where A and B are both bodies corporate at the effective date of the leaseback they must not be members of the same group for the purposes of group relief
Irrespective of whether relief for the leaseback is claimed, the
chargeable consideration for each leg should represent the market
value of the interest acquired under the respective leg. The reason
for this is that the transactions are an exchange to which FA03/S47
and FA03/SCH4/PARA5 apply.
The market value of the sale leg will depend upon whether
there was a written agreement, at the time of the sale, for the
leaseback leg to be entered into. If there was, the market value of
the sale leg should take this encumbrance into account (and value
any rent obtainable from the leaseback leg). If there is no such
agreement, the market value of the sale leg should be the
unencumbered value.
As a consequence of amendments inserted by FA 2004, the scope
of the relief has been extended so that it now applies in
circumstances where the sale is effected by the grant of a lease
followed by an underlease back. The relief is also available in
respect of sale and leaseback transactions in residential property.
The leaseback element of an equity release or home reversion
transaction may benefit from relief if all the qualifying
conditions are met.
There is no particular requirement for a leaseback to be in
consideration of only one sale, or for one sale to be in
consideration of only one leaseback for the relief to apply. It is
possible to have one sale with multiple leasebacks and also to have
several sales with only one leaseback.
Refer to legislation at:
- FA03/S57A
- FA04/S296
- FA04/SCH39/PARA16
