Connected Party & Linked Transaction Decisions
Understanding s108 Finance Act 2003, connected persons definitions under s1122 CTA 2010, aggregation rules, and how linked transactions affect your SDLT liability.
In this article
What Are Linked Transactions?
Section 108 of the Finance Act 2003 contains anti-avoidance provisions that prevent purchasers from splitting property transactions to avoid higher SDLT rates. Transactions are linked if they form part of a single scheme, arrangement or series of transactions between the same parties or connected persons.
The linked transaction rules require that the consideration for all linked purchases be aggregated, with each transaction then taxed at the rate applicable to the total consideration. This prevents artificial fragmentation of deals to stay within lower tax bands.
Connected Persons Definition
Under s1122 of the Corporation Tax Act 2010, connected persons include:
- Relatives: Spouses, civil partners, ancestors, descendants, siblings, and their spouses/civil partners
- Business partners: Persons in partnership and their relatives or companies they control
- Companies under common control: Companies controlled by the same person or group
- Trustees and settlors: Trustees of a settlement and the settlor or connected persons
- Companies and participators: A company and persons controlling it or their relatives
This broad definition ensures HMRC can capture arrangements where properties are purchased through family members, business associates, or corporate structures to circumvent SDLT.
How Aggregation Works
When transactions are linked, HMRC requires aggregation of the total consideration. Each individual transaction is then taxed at the rate applicable to the aggregate amount, not its individual value.
Calculation Example
Scenario: Two siblings purchase two properties on the same day:
- Property A: £400,000
- Property B: £350,000
Without linking (incorrect):
- Property A SDLT: £10,000
- Property B SDLT: £7,500
- Total: £17,500
With linking (correct):
- Aggregate consideration: £750,000
- Each transaction taxed at rates for £750,000
- Property A SDLT: £27,500
- Property B SDLT: £27,500
- Total: £55,000
The linking increases total SDLT by £37,500 (214% increase)
Key Tribunal Decisions
Project Blue Ltd v HMRC [2018]
Issue: Whether purchases of multiple residential properties by connected companies were linked transactions.
Outcome: Upper Tribunal ruled transactions were linked where they formed part of a single commercial arrangement, even if documented separately. The tribunal emphasized substance over form.
Impact: Established that HMRC can look beyond legal structure to commercial reality when determining linkage.
Vardy v HMRC [2012]
Issue: Wife purchased property adjacent to husband's existing property. HMRC argued transactions were linked through connected persons.
Outcome: Tribunal found for HMRC. Purchases by spouses of adjoining properties forming a single residence were linked under s108.
Impact: Confirmed that family arrangements cannot be used to fragment purchases artificially.
Bewley v HMRC [2019]
Issue: Portfolio purchase of rental properties by partners in a property investment business.
Outcome: First-tier Tribunal ruled all acquisitions were linked as they formed part of a pre-arranged investment strategy between business partners.
Impact: Portfolio deals between business associates presumed linked unless clearly independent decisions.
Impact of April 2025 Changes on Linked Transactions
| Measure | Before April 2025 | From April 2025 |
|---|---|---|
| Nil-rate band | £250,000 | £125,000 |
| Additional dwelling surcharge | 3% | 5% |
| FTB relief threshold | £425,000 | £300,000 |
| Corporate rate (>£500k) | 15% | 17% |
| Linked transaction rules | Unchanged | Unchanged but higher rates mean bigger tax impact |
| HMRC scrutiny of arrangements | Increasing | More active enforcement expected |
The April 2025 changes significantly increase the cost of linked transactions. The higher additional dwelling surcharge (5% vs 3%) and reduced nil-rate band mean aggregation has a much greater financial impact than before.
Common Scenarios Triggering Linkage
Family Transactions
- • Spouses purchasing separate flats in the same development
- • Parent and adult child buying adjoining properties
- • Siblings acquiring portfolio of rental properties together
- • Family members purchasing shares in the same property investment company
Portfolio Deals
- • Bulk purchase of properties from same vendor negotiated as package
- • Acquisition of multiple units in student accommodation block
- • Purchase of entire residential development by connected companies
- • Sequential purchases forming part of documented investment strategy
Corporate Structures
- • Sister companies controlled by same person buying properties
- • Purchases by holding company and subsidiaries
- • SPV acquisitions as part of group property strategy
- • Nominee companies purchasing for same beneficial owner
Business Partner Arrangements
- • Partners in property business acquiring separate investments
- • Joint venture participants purchasing related properties
- • Business associates acquiring properties in same location
- • Members of property syndicate making coordinated purchases
Planning Considerations & Warnings
Legitimate Planning
- • Ensure genuine independence of purchase decisions and timing
- • Avoid pre-arranged schemes or coordinated negotiations
- • Document separate financing and legal advice for each transaction
- • Consider timing gaps between related purchases (though not determinative)
HMRC Scrutiny Indicators
- • Same completion dates for connected party purchases
- • Identical or related solicitors acting for connected buyers
- • Bulk discounts or package pricing from vendor
- • Properties forming obvious commercial unit when combined
- • Evidence of pre-completion coordination or joint planning
Penalties for Non-Disclosure
Failure to declare linked transactions can result in:
- • Backdated tax and interest charges
- • Penalties up to 100% of tax due for deliberate concealment
- • Criminal prosecution in cases of fraud
- • Professional sanctions for advisers facilitating avoidance
Critical Warning:
Do not attempt to structure transactions artificially to avoid linkage. HMRC has broad powers under s75A FA 2003 (General Anti-Abuse Rule) to counteract arrangements designed to avoid SDLT. Always seek professional advice from a qualified tax adviser or solicitor before proceeding with connected party purchases.
When to Seek Professional Advice
Consult a specialist SDLT adviser or tax solicitor if:
- • You are purchasing multiple properties within 12 months
- • Connected persons are buying properties as part of the same development or from the same vendor
- • You are structuring corporate acquisitions involving residential property
- • HMRC has opened an enquiry into potential linked transactions
- • You are purchasing through partnership, trust or complex ownership structures
- • Your transactions involve a mix of commercial and residential elements
Early professional advice can identify legitimate structuring opportunities and ensure full compliance with s108 requirements.
Calculate Your SDLT on Linked Transactions
Use our specialized calculators to understand the SDLT impact when purchasing multiple properties or connected party transactions.
View All CalculatorsEmma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.