Taxes Consolidation Act 1997 section 100

Charge on sale of land with right to reconveyance

Section 100 sets out the tax treatment where land is sold subject to a condition that it will, or may be required to be, reconveyed back to the seller at a future date for a lower price.

• Where land is sold with a right of reconveyance to the seller (or a connected person), the seller is taxable under Case IV of Schedule D on the difference between the sale price and the reconveyance price, with a 2% per annum reduction available where the reconveyance date is two or more years after the sale.
• If the reconveyance date is not fixed and the buy-back price varies, the lowest possible price is used for the initial tax calculation; the seller may claim a refund within four years of the actual reconveyance date if the tax paid turns out to have been excessive.
• Where the sale terms provide for a leaseback to the seller or a connected person rather than a straightforward reconveyance, the section applies as if the lease were a reconveyance at a price equal to any lease premium plus the value of the right to receive the reversion — but this does not apply if the lease is granted and begins to run within one month of the sale.
• Where the seller is a dealer in land, trading receipts are reduced by the amount taxed under this section to prevent double taxation, and any subsequent recalculation of the Case IV charge triggers a corresponding adjustment to the Case I assessment.