Examples of how the GAAR applies to tax arrangements

entitled to claim or because the payment made by C is within the zero rate
SDLT band.
Examples
• B and C are husband and wife respectively. Hence C contends that no
charge to SDLT arises because she has not paid anything to her
husband for the land, and therefore has no tax liability.
• Company B, owned by the purchaser C, enters a contract to buy the
property but then claims to distribute this property as a dividend to C.
B and C claim that Company B’s purchase is disregarded under the
SDLT rules at section 45, FA 2003, and, as C itself has not paid
anything for the property, it doesn’t have to pay SDLT either.
• A agrees to sell land to B, and B agrees to sell the same land to C
which is a partnership where the partners are B and persons connected
with him. At the same time as the completion of the A-B contract, the
B–C contract completes. B argues that no SDLT is due as his contract
is disregarded by section 45, FA 2003 whilst C argues that it has no or
a limited liability to SDLT because of the connection with B under the
provisions of Part 3, Schedule 15, FA 2003.
• C is a trust that is connected with B who is the beneficiary and settlor of
the trust. B acquires the land from A (an unconnected third party), then
takes advantage of the transfer of rights rules at section 45, FA 2003 to
sell the land to C, who purchases the land for a small sum. B argues
that no SDLT is due as his contract is disregarded by section 45, FA
2003, C contends it has paid the full asking price in the contract with B
and, as the amount involved is within the SDLT zero rate band, no tax
liability arises.
5.1.5 What is the GAAR analysis under clause 2(2)?
5.1.5.1 Are the substantive results of the arrangements consistent with any
principles on which the relevant tax provisions are based (whether express or
implied) and the policy objectives of those provisions?
The provisions at section 45, FA 2003 apply where, broadly speaking, person
A agrees to sell land to person B, but before that original transaction is
completed, person B agrees to sell the same land to person C (or person B
agrees to transfer its rights under the original contract to C).
The transfer of rights to C is not regarded as a land transaction – rather C is
treated as the purchaser under a notional “secondary contract”. On
completion of C’s acquisition, C is charged SDLT on the aggregate of the
consideration given for the transfer of rights plus any consideration given by C
(or any connected party) under the original contract.
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