What Is SDLT Group Relief and How Do You Claim It?

Stamp Duty Land Tax is a land tax imposed on the acquisition of land and properties in England and Northern Ireland over the basic threshold. The basic threshold for SDLT has been changed from £250,000 to £125,000 from 1 April 2025. Under normal circumstances, when a property is transferred, SDLT is typically payable by the purchaser based on the property’s value. However, with group relief, SDLT is not payable on property transactions within a group of companies, provided certain conditions are met.

“Group relief” is a provision that allows companies within the same corporate group to transfer properties for commercial purposes without the SDLT liability. However, the relief is subject to detailed conditions and can be withdrawn.

Group relief can be claimed in SDLT when a corporate group structure involves in a property transaction. If a group relief claim is successful, the purchasing company do not have to pay SDLT on property transfers within the group. The group relief, however, must be claimed as other SDLT reliefs.

Therefore, it is advisable for the purchaser of the property to enquire with professionals whether any property transaction within the group of companies is eligible for the group relief. In this guide, we will navigate you through group relief, covering its eligibility, availability, withdrawal, and application procedures along with other reliefs.

What is an SDLT Group Relief?

Section 62 of the Finance Act 2003 (“FA 2003”) provides provision related to group relief which is elaborated by Schedule 7 of the FA 2003. It stipulates that if the purchaser and vendor of a chargeable interest are companies and, at the effective date of the transaction, they are both members of the same group, relief from SDLT may be claimed by the purchaser, provided certain conditions are met.

SDLTM23010 further explains that group relief, for the purpose of SDLT is a taxation scheme that allows companies within the same group to transfer properties for commercial reasons without incurring SDLT charges. Companies within the same group refer to those that are members of the same group as the vendor or purchaser at the effective date of the transaction.

This type of taxation relief is designed for intra-group property transfers, making them more financially advantageous.

Conditions for Availing the SDLT Group Relief Claim

A transaction will qualify for the SDLT group relief if both the seller and the buyer (in the case of land transfers) or the lessor and the lessee (in the case of grants or assignments of leases) are both members of the same group of companies, at the effective date of the transaction (usually the date of completion).

Paragraph 1 of Schedule 7 of the FA 2003 outlines the following criteria for group relief eligibility:

• Vendor and purchasers are companies that are members of the same corporate group, at the effective date of the transaction.
• For the purpose of group relief:

•  A company (“Company A”) is the 75% subsidiary of another company (“Company B”) if:

Definition of a Company for SDLT Group Relief Claim

• Must be a body corporate. A body corporate (wherever incorporated or resident), for the purposes of SDLT group relief, is a company. However, this includes Limited Liability Partnership as well. (Refer special case for a limited Liability Partnership in case of SDLT).
  

Corporate Group and Subsidiary Rule

The SDLT group relief only applies to the companies who are a part of the same corporate group. Paragraph 1(2) of Schedule 7 of the FA 2003 specifies that, for the purpose of SDLT group relief; ‘companies are members of the same group’ if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

• If a company (A) directly owns all the ordinary share capital of another company (B), A is treated as indirectly owning all the ordinary share capital owned by B.
• If a company (A) directly owns a fraction of the ordinary share capital of another company (B), and B owns ordinary share capital of a third company (C), A is treated as indirectly owning a portion of C’s ordinary share capital.

This portion is calculated using the multiplication formula: (F X M),

where (F) is the fraction of B’s ordinary share capital owned by A, and (M) is the amount of C’s ordinary share capital owned by B.

What if the Company Goes into Liquidation?

The company going into liquidation loses the benefit of ownership of all its asset. Therefore, a parent company going into liquidation no longer beneficially owns its share in any of its subsidiaries resulting in the non-availability of SDLT group relief. This however does not apply if the company goes into administration.

A parent going into administration does not lose beneficial ownership of its assets; an inferior company’s going into liquidation or administration does not sever its group relationship with the companies above it.

SDLTM23082 outlines, HMRC considers that there has been no change in control of the company in the following circumstances:

• HMRC will not view the appointment of a liquidator as resulting in a change of control of a company, provided that the liquidation can be shown to be part of a scheme of reconstruction involving a successful claim to further relief or where the economic ownership of the relevant assets remains within the group.
• A change in control does not occur when a new holding company is inserted between the original ultimate parent company and its shareholders or between the purchaser and the parent company, with no change in overall economic ownership of the group. HMRC will look at the ultimate shareholding to determine if there has been a change in control.
• If there is a change in control of the purchaser due to a loan creditor, group relief will not be withdrawn if the persons who controlled the purchaser before the change continue to do so, ensuring that the introduction of loan creditors does not disrupt a group’s financing arrangements.
• If control of a publicly owned company changes due to an ordinary market transfer of its shares, there will be no recovery. HMRC will not interpret a change in control so broadly that day-to-day transactions between unconnected minority shareholders in the stock exchange trigger a claw back.
• The rights or powers held by partners in a majority shareholder partnership will not be attributed to each other. Additionally, changes in the general partner will be disregarded when determining whether there has been a change in control.

Special Case for a Limited Liability Partnership in Case of SDLT group relief claim

After change in view from HMRC, Limited Liability Partnership incorporated under the Limited Liability Partnerships Act 2002 is considered a body corporate.

However, due to the lack of issued ordinary share capital, an LLP cannot be a subsidiary or group with its members’ subsidiaries. The ‘look through’ principle in FA 2003 treats the LLP’s chargeable interests as held by its members, preventing the LLP from claiming SDLT group relief. Therefore, transfers by the LLP to a member of its group do not qualify for group relief, placing LLPs at a disadvantage compared to other partnerships.

What is 75% or More of Real Equity?

75% or more of real equity test is important to avoid artificial group creation for claiming SDLT relief. This is based on the Principle of Substance over form.

Any company would own 75% of the ordinary share of another company by the nominal value whereas the real ordinary shares would be owned by others. To prevent this, there is a second test to the effect that ownership must also be of 75% or more of the equity in substance.

This is fairly complex and careful consideration must be taken when

• There are different classes of shares in the company or an intermediate company above or
• The company or the intermediate company above it in the group structure owes debt on a non-commercial loan unless the debt is owed to its suggested Parent

The test of real equity must be such that it would receive 75% or more of both when

• Some shares’ rights are such that equity holders’ rights would be different in the future, the calculation must also be done on the basis that the change of right has happened
• If the changes are such that it is merely might take place, such as changes to the share capital if options are exercised, are ignored
• Some shares have rights which are limited by reference to a specified amount or amounts, the calculation must also be done on the assumption that the shareholders in question have waived those (limited) rights, and the 75% test must be passed in all the calculations

When is SDLT Group Relief not Available?

Group relief can be restricted under various types of arrangements according to FA 2003. The term “arrangement” is used in each of the restrictions to the availability of group relief in the FA 2003. SDLTM23014 states “arrangement” is wide defined to include any scheme, arrangement or understanding, whether legally enforceable or not.

1. Control of the Purchasing Company

Para 2(1) of Schedule 7 of the FA 2003 provides group relief is unavailable if, at the effective date of the transaction, arrangements exist where a person or persons has or ‘could obtain’ control of the purchaser company but not the vendor company.

This restriction aims to prevent SDLT avoidance by transferring property out of the group.

However, Para 2(3A) of Schedule 7 of the FA 2003 provides these restrictions do not apply if the arrangements are for transferring a company's business to another company where Section 96 of the Finance Act 1997(“FA 1997”) applies (transfers in connection with the demutualisation of insurance companies), provided the conditions for relief under that section are met and the purchaser becomes a member of the same group as the acquiring company.

HMRC will not deny group relief in transfers where the transferor leaves the group, but the asset stays within it. 

There are different other types of 'could obtain' arrangements due to which the group relief of Stamp Duty Land Tax will not be available. Tax experts at UK Property Accountants can carry out full assessment of the situation and assist you in providing the appropriate recommendation.

Group relief may be withdrawn if the purchaser company ceases to be a group member within three years. There is also a clawback if the leaving of the group takes place after the three years but pursuant to, or in connection with, arrangements made before the end of the three years. More about this explained in ‘Triggering the Clawback’ below.

The tax that would originally have been paid becomes chargeable and must be paid within 30 days after the event which caused the withdrawal of the group relief.

As discussed above, a vendor company going into administration and selling a property to its parent, the relief will not be available. This is based on the idea that no-one, or only the administrator controls a company in administration.

2. Consideration by someone outside the group

Para 2(2a) of Schedule 7 of the FA 2003 provides group relief is not available if the transaction is affected in pursuance of, or in connection with, arrangements under which the consideration (or any part of it), is to be provided or received directly or indirectly by a person other than the group company.

However, Para 2(3) of Schedule 7 of the FA 2003, provides arrangements fall within this restriction if they enable a vendor or purchaser, or another group company, to provide or part with any consideration through transactions involving payments or dispositions by someone outside the group.

3. Where purchaser ceases to be member of the same group as vendor

Para 2(2b) of Schedule 7 of the FA 2003 provides group relief is not available if the transaction is affected in pursuance of, or in connection with, arrangements under which the vendor and purchaser will cease to be in the same group because the purchaser will cease being a 75% subsidiary of the vendor or a third company.

However, para 2(3A), Sch 7, FA 2003 provides these restrictions do not apply if the arrangements are for transferring a company's business to another company where Section 96 of the FA 1997 applies (transfers in connection with the demutualisation of insurance companies), provided the conditions for relief under that section are met.

4. Transaction for tax avoidance or not for bona fide commercial reason

Para 2(4A) of Schedule 7 of the FA 2003 provides group relief is also unavailable if the transaction is not for bona fide commercial reasons or forms part of arrangements of which the main purpose (one of the main purposes) is tax avoidance.

In The Tower One St George Wharf Ltd v HMRC [2022] UKFTT 154 (TC), the First Tier Tribunal denied SDLT group relief on the acquisition of a development site from a group company, finding that the transaction was part of arrangements with the main purpose of avoiding tax liability, thus activating the targeted anti-avoidance rule (TAAR). This case clarifies the distinction between legitimate commercial transactions and tax avoidance schemes, emphasizing the importance of assessing the primary motives behind transactions when considering tax implications.

What is the Procedure for SDLT Group Relief Claim?

Group relief is not given unless the purchasing company claims it. A purchaser claiming group relief puts in its land transaction return in the ordinary way. No documents are required to be submitted for claiming the Group Relief in Stamp Duty Land Tax. 

Section 62 (3) of the FA 2003 provides that the relief must be claimed in a land transaction return or an amendment of such a return. It can be claimed by submitting on the relevant land transaction return, SDLT1 (or its electronic equivalent), using code 12.

SDLTM23012 provides, after processing the SDLT1 form, if the land transaction return is complete, HMRC will issue a Revenue Certificate (SDLT5), that enables registration of title.

While submitting to Land Registry for registration, SDLT5 certificate must be included with the registration application. The Land Registry will process the registration without delay, even if HMRC later enquires into the transaction.

Companies must determine the admissibility of their claims and ensure accuracy to avoid penalties.

How to Recover the SDLT in Group Relief?

Paragraph 5 of Schedule 7 of the FA 2003 provides when group relief is withdrawn, the primary liability to pay any resulting SDLT due falls on the purchaser. However, if the tax (or any part of it) remains unpaid after a period of six months, it can be recovered from several parties:

• The vendor
• Any company in the same group as the purchaser, if it is positioned above the purchaser in the group structure (i.e., it owns at least 75% of the purchaser or another higher company)
• Any controlling director of the purchaser or a company controlling the purchaser.

SDLTM23100 further explains, to enable recovery of unpaid tax, a notice must be served on the person from whom the tax is to be recovered. The notice requires the unpaid amount of tax to be paid within 30 days of its service, calculated based on the market value of the chargeable interest transferred in the original transaction. It must be served before the end of the three-year period starting from when the tax was finally determined and must state the amount of tax due. The notice has effect for recovering the tax and any interest and for appeals, as if it were an assessment and the tax was due from the person served. Once the person served with the notice has paid the tax (and interest), they are legally entitled to recover the amount paid from the purchaser. No deduction is allowed in computing any income, profits, or losses for tax purposes for the amount paid.

Triggering the Clawback of SDLT Group Relief Claim

The clawback rule for SDLT group relief is triggered if the purchaser ceases to be a member of the same group as the vendor within three years of the effective date of the intra-group transaction, provided the purchaser or a relevant associated company still owns the property. A relevant associated company is one that ceases to be a member of the same group as the vendor due to the purchaser’s departure from the group. Therefore, transferring the property to a subsidiary does not avoid clawback.

“Claw-back” is an essential element of group relief, the practical challenges arising from clawback rules should not be over-looked. There are number of circumstances in which relief claimed can be subject to clawback within three years of a transaction taking place.

Paragraph 3 of Schedule 7 of the FA 2003 provides the conditions for Clawback rule (withdrawal of group relief) as discussed below.

When is SDLT Group Relief Withdrawn?

Under following circumstances within the three years of the effective date of transaction, the group relief that had been the subject of a successful claim can be withdrawn.

•  If the Purchaser ceases to be a member of the same group as the vendor:
• If either the purchaser or a ‘relevant associated company’ holds the relevant chargeable interest when the purchaser leaves the group, ceases to be a member of the same group as the vendor.

There can be other circumstances under which the withdrawal of relief may be satisfied, and they would depend on the “arrangements” made within three years of the effective date. The effect of the withdrawal of relief is a charge to tax as if the relevant transaction had taken place for a market value consideration. It becomes payable 30 days after the event which causes the withdrawal of the group relief.

Exception to the Claw Back Rule:

SDLTM23080 explains group relief is not withdrawn where the purchaser ceases to be a member of the same group as the vendor in the following circumstances:

1. When Vendor Leaves the Group:

Paragraph 4ZA of Schedule 7 of the FA 2003 provides that group relief is not withdrawn where the purchaser ceases to be a member of the same group as the vendor because the vendor leaves the group. The vendor is regarded as leaving the group if the companies cease to be members of the same group by reason of a transaction relating to shares in: (a) the vendor, or (b) another company that is above the vendor in the group structure, and because of the transaction ceases to be a member of the same group as the purchaser.

However, for transactions on or after 13 March 2008, Paragraph 4ZA (4) of Schedule 7 of the FA 2003 provides that a change in control of the purchaser after the vendor leaves the group is deemed to be the purchaser leaving the same group for claw-back purposes. There is a change in the control of the purchaser if: (a) a person who controls the purchaser (alone or with others) ceases to do so, (b) a person obtains control of the purchaser (alone or with others), or (c) the purchaser is wound up.

2. Winding Up:

Paragraph 4(4) of Schedule 7 of the FA 2003 provides where the purchaser ceases to be a member of the same group as the vendor by reason of anything done for the purposes of, or during, winding up the vendor or another company above the vendor in the group structure, group relief is not withdrawn. A company is above the vendor in the group structure if the vendor (or another company above the vendor in the group structure) is a 75% subsidiary of the company.

3. Acquisition of Shares by Another Company:

Paragraph 4(6) of Schedule 7 of the FA 2003 provides where the purchaser ceases to be a member of the same group as the vendor due to an acquisition of shares by another company (“the acquiring company”) in relation to which Section 75 of the Finance Act 1986 applies (stamp duty: acquisition relief) and the conditions for relief under that section are met. Additionally, the purchaser is immediately after that acquisition a member of the same group as the acquiring company.

4. Transfer of Business:

Paragraph 4(6A) of Schedule 7 of the FA 2003 provides where the purchaser ceases to be a member of the same group as the vendor due to the transfer of the whole or part of the vendor's business to another company (“the acquiring company”) in relation to which Section 96 of the FA 1997 applies (stamp duty relief: demutualisation of insurance companies) and the conditions for relief under that section are met. Additionally, if the purchaser is immediately after that transfer a member of the same group as the acquiring company.

However, if relief is not withdrawn due to an acquisition of shares or business as described above, withdrawal of relief may be considered if the purchaser ceases to be a member of the same group as the acquiring company before the end of a period of three years beginning with the effective date of the relevant transaction, or in pursuance of arrangements made before the end of that period.

For withdrawal of relief to be considered, the purchaser (or a relevant associated company) must hold:

• The chargeable interest acquired under the relevant transaction or a derived chargeable interest (e.g., reversion of a sublease), and
• The chargeable interest has not been acquired at market value in a chargeable transaction where group relief was available but not claimed.

A relevant associated company is one that is a member of the same group as the purchaser that ceases to be a member of the same group as the company acquiring the shares or business due to the purchaser ceasing to be a member.

Some of the Illustration Regarding the SDLT Group Relief Clawback

However, there is an anti-avoidance provision now which says that if after C Ltd is sold and there is a change in the ultimate control of B, B has a clawback charge after all. This is an exception of the normal clawback provision. This includes if A Ltd is sold which carries B Ltd with it, also includes if ultimate control of B is obtained by another person or persons, or B Ltd is wound up.

There are some exceptions to Clawback provision where vendor is wounded up or group ceases by virtue of mirror image reconstruction. These are fairly complicated and complex arrangements which has to be separately studied by complying with the provision. We at UKPA expertise in this and can provide you the most appropriate and suitable tax advice.

“Whitelist” From Stamp Office

The Stamp Office has published a “whitelist” containing typical circumstances in which SDLT group relief should not be denied in SDLTM23040. The list should be taken as a general guidance, transactions within the whitelist include,

• The transfer of property intra-group at a time when it is envisaged that shares in that company may be sold more than three years later.
• The transfer of property intra-group prior to the sale of shares in the transferor company, in order that the property does not pass to the purchaser of the shares; and
• Borrowings on normal commercial terms from a commercial lender, or intra-group in circumstances which would have been commercial had they arisen between unconnected parties.

In the whitelist it is mentioned that although a tax advantage might be obtained by the purchaser’s group, SDLT group relief will not be denied subject to the warning that ‘the transactions do not form part of any larger scheme or arrangement which might have tax consequences.

Other SDLT Reliefs

What is a SDLT Reconstruction Relief?

SDLT is not liable to be paid when the transfer forming part of certain company reconstructions. Reconstruction relief allows land and buildings to be transferred between two companies, as part of a transfer of an undertaking in exchange of shares without any change in ownership. Here 'reconstruction' does not necessarily have to be in legal form.

'Reconstruction relief' as per SDLTM23200, on the other hand, is an exemption from tax for no-change-in-ultimate-ownership cases and 'acquisition relief', a special rate of 0.5 per cent for partition of trading companies is available. The basic rule is that an acquisition of property is wholly exempt from SDLT if the vendor and the purchaser are at the effective date companies in the same group. A company splitting its existing business is one of the ways of reconstruction. Reconstruction is when there is no change in the shareholders of both new company and old company. Here, the old company does not have to be liquidated; the old company can simply distribute its assets and shares in the subsidiaries to a new company or the new company can in return issue shares to the shareholder of the old company. Any type of reconstruction can be carried out by a court-approved scheme of arrangement.

One important thing to note during any reconstruction is if the group relief that was already given is clawed back.

What is an SDLT Acquisition Relief?

Acquisition Relief is available when there is a transfer of land in connection to acquisition of an undertaking. The rate of SDLT in this instance would be restricted to 0.5%.

For availing this relief, the old company must transfer all or part of it’s undertaking to an acquiring company. The primary activity of the undertaking or the part of undertaking being acquired has to be trading with a caveat that this relief is not available to land dealing trader.

What are the Conditions to Avail 0.5% SDLT on Chargeable Consideration?

• The consideration must include irredeemable shares issued by the new company to shareholders of the old company or to the old company itself and no more than 10% cash.
• The new company must not be associated with any third company which has arrangements with the old company concerting the new shares.
• The acquisition must be for bona fide commercial reasons and must not be part of the avoidance of liability to tax.

Clawback of SDLT Reconstruction and Acquisition Relief

• If control of the acquiring company changes within 3 years of the transaction.
• If there is an arrangement put in place within that period which results in a change of control after the period of 3 years.

Exceptions to Clawback of SDLT Reconstruction and Acquisition Relief

• The control of the acquiring company changes as a result of a share transaction effected in accordance with divorce, separation, etc.
• Clawback is not triggered if the share transaction which would fall within the exemption for variations of wills.
• An exempt intra group transfer. However, there is still clawback if the company buying those shares is in the same group as the old company and later, within the original three year period, leaves it.
• A loan creditor or creditors ceasing to have control of the company and no other change in control occurs.
• A transfer of shares to another company in relation to which acquisition relief applies. Relief may be withdrawn following a subsequent non-exempt transfer.

SDLT Reconstruction and Acquisition Relief Claim Procedure

The procedure of claiming any one of these relief is fairly simple. Followings are the procedures:

• The company trying to claim the relief should put in SDLT 1 in the ordinary way.
• Inserting the appropriate code at Q9.
• The company can positively explain things if it wants by writing to the Birmingham Stamp Office with a copy of the return.

Conclusion

To sum up, group relief for the purpose of SDLT, functions as a tax-saving measure for corporate groups when transferring assets internally. This provision facilitates seamless and efficient transactions, enabling companies to restructure and reorganize without incurring additional tax liabilities.

However, securing SDLT relief involves a complex process that requires a deep understanding of the regulations and a careful approach.  Each step is crucial for a successful application, from determining eligibility to preparing necessary documentation and submitting your claim.

At UK Property Accountants, we assist you in navigating the intricacies of the SDLT relief scheme and provide expert advice on maximizing your SDLT savings. Our services extend beyond merely claiming group, reconstruction and acquisition relief. We offer comprehensive financial planning advice, including budgeting and long-term tax strategies, to support your ongoing financial success.