Specific rules apply where a contract is entered into whereby one party to the contract (B – the other party being A) has the right to direct a conveyance to themself or to a third party (C). An example of this is a development agreement or a building licence agreement where the developer has the right to enter onto the land and build on it and then direct the conveyance of the completed plots. In this case the effective date of the transaction is the date when the contract is substantially performed by B.
If the chargeable interest is conveyed to C at B’s request or direction without B having taken possession or completed, then there is only one land transaction, that between A to C. However, if the contract is substantially performed by B, B is treated as having acquired a chargeable interest and entered into a land transaction.
Whether or not a LBTT return is required to be made to us depends on whether or not it is a notifiable transaction (see LBTT4003). The consideration given, or that is to be given, by B is charged to LBTT once substantial performance occurs.
Where B directs the original seller (A) to convey a plot to C, the rules above about ‘contract and conveyance’, ‘completion without substantial performance’ and ‘substantial performance without completion’ apply to the contract between B and C and to the conveyance from A to C. The result is that C is liable to pay LBTT on the consideration paid to A or B, either on completion or on substantial performance.
A worked example covering a contract which provides for conveyance to a third party is provided separately on our website under LBTT Worked Examples.