SDLTM09170 | Scheme Transactions: Section 75A (1)(b)

(This page was introduced on 15 January 2020 and updated on 14 May 2021)

The second condition to consider when looking at applying Section 75A is found at Section 75A(1)(b). The condition is that there are a number of transactions, including the disposal and acquisition, which are involved in connection with the disposal of the chargeable interest by V and the acquisition of V’s chargeable interest or one derived from it by P.

These transactions are defined as “the scheme transactions”.

It is in HMRC’s view that the decision in Project Blue Ltd v HMRC supports a wide interpretation of scheme transactions.

A transaction which forms part of the context in which P acquires V’s chargeable interest, or one derived from it, will be a scheme transaction. So, any transaction that is involved in connection with the disposal and acquisition of the chargeable interest, or one deriving from it, will be a scheme transaction for the purposes of Section 75A.

In applying Section 75A, it is important to consider, in whole, the disposal of the chargeable interest by V and the acquisition of that interest or one deriving from it by P. It is important to look at the totality of the scheme transactions in identifying V and P and in calculating the consideration for the notional land transaction.

A transaction which occurs after the acquisition of the chargeable interest by P, may still comprise a scheme transaction (Section 75A(2)(b)). Other specifically provided for transactions can be found at SDLTM09180.

There is no tax avoidance motive required for a transaction to meet the definition of a scheme transaction. Similarly, scheme transactions need not be linked together by, or be part of, a larger scheme to avoid tax for Section 75A to be applied i.e. Section 75A can apply where the reduction in SDLT is an unintended consequence of the transactions.

A scheme transaction need not be a land transaction. Where a scheme transaction is a land transaction, it will be disregarded under this Part and will be replaced by the notional land transaction (Section 75A(4)). When applying Section 75A, in place of all the scheme transactions which are land transactions there will be a substituted notional land transaction consisting of the acquisition of V’s chargeable interest by P, which V has disposed of.