SCHEDULE 2PRE-COMPLETION TRANSACTIONS

PART 1INTRODUCTION AND KEY CONCEPTS

Overview

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1

This Schedule makes provision about the application of this Act (in particular section 10 (contract and transfer)) to pre-completion transactions (the meaning of which is set out in paragraph 3).

2

The Schedule is arranged as follows—

a

this Part makes introductory provisions setting out the circumstances where this Schedule applies (paragraph 2) and explaining the meaning of ““pre-completion transaction”” and other key terms referred to in the Schedule;

b

Part 2 sets out how this Act applies in cases where the pre-completion transaction is an assignment of rights (the meaning of which is set out in paragraph 6);

c

Part 3 sets out how this Act applies in cases involving free-standing transfers (the meaning of which is set out in paragraph 12);

d

Part 4 provides for a special rule (““the minimum consideration rule””) which applies to determine the consideration given in cases where the parties in relation to a pre-completion transaction are connected or are otherwise not acting at arm's length;

e

Part 5 provides for relief to be available to certain buyers in cases where certain pre-completion transactions are entered into;

f

Part 6 makes some general interpretative provisions.

Application of this Schedule

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1

This Schedule applies where—

a

a person (““the original buyer””) enters into a contract (““the original contract””) for the acquisition by the original buyer of a chargeable interest under which the acquisition is to be completed by a transfer, and

b

there is a pre-completion transaction.

2

The reference in sub-paragraph (1)(a) to a contract does not include a contract that is an assignment of rights in relation to another contract.

3

For any one contract for the acquisition of a chargeable interest there is only one original buyer (and for the purposes of this Schedule joint original buyers are to be treated as one original buyer).

4

This Schedule does not apply where paragraph 21 of Schedule 6 (assignment of agreement for lease) applies (and accordingly, despite paragraph 3, the assignment of an agreement for lease is not a pre-completion transaction).

Meaning of ““pre-completion transaction””

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1

A transaction is a pre-completion transaction if—

a

as a result of the transaction a person other than the original buyer (“"the transferee””) becomes entitled to call for a transfer to the transferee of the whole or part of the subject-matter of the original contract, and

b

immediately before the transaction took place a person (other than the transferee but not necessarily the original buyer) was entitled under the original contract to call for a transfer of the whole or that part of that subject-matter.

2

A transaction that gives effect to a person's acquisition of the whole or part of the subject-matter of the original contract is not a pre-completion transaction.

3

The grant or assignment of an option is not a pre-completion transaction.

4

The fact that a transaction has the effect of discharging the original contract does not prevent that transaction from being a pre-completion transaction.

Other key terms

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1

In this Schedule, references to part of the subject-matter of the original contract—

a

are to a chargeable interest that is the same as the chargeable interest referred to in paragraph 2(1)(a) except that it relates to part only of the land concerned, and

b

also include, so far as is appropriate, interests or rights appurtenant or pertaining to the chargeable interest.

2

In this Schedule, “"the transferor””, in relation to a pre-completion transaction, means a party to the pre-completion transaction who immediately before the pre-completion transaction took place was entitled to call for a transfer of (what became) the subject-matter of the pre-completion transaction.

3

References in this Schedule to the ““subject-matter”” of a pre-completion transaction—

a

are to the chargeable interest the transfer of which the transferee is entitled to call for as a result of the pre-completion transaction, and

b

also include, so far as is appropriate, interests or rights appurtenant or pertaining to the chargeable interest.

Tax not charged on transferee by reason of the pre-completion transaction

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The transferee is not regarded as entering into a land transaction only by reason of the pre-completion transaction.