Guide on SDLT Group Relief Clawback for Transfers Within Three Years

SDLT group relief clawback on intra-group property transfers before a share sale

This rule stops groups avoiding SDLT by transferring property within the group using group relief, moving it again to another group company, and then selling that company out of the group within 3 years. Even if the company sold was not the original buyer that claimed relief, HMRC may still apply a clawback under paragraph 4A if the normal clawback rule does not catch the arrangement.

• Paragraph 4A is aimed at “drop and bounce” arrangements where land is transferred within a group, then transferred again, before the property-holding company is sold.
• It can apply if there is a change of control within 3 years of the relevant transaction, or under arrangements made within that period, and the usual paragraph 3 clawback does not apply.
• The rule looks back at earlier relieved transfers of the same chargeable interest, or a derived chargeable interest, made in the previous 3 years.
• If triggered, the legislation treats the parties as if they were the vendor in the earliest relieved transfer and the purchaser in the latest transaction, so a clawback can still arise.
• In practice, advisers should trace both the property and the group structure over the full 3-year period before any share sale.

Scroll down for the full analysis.

SDLT group relief clawback where property is dropped, bounced, and the group is later sold

This page explains a specific anti-avoidance rule in the SDLT group relief legislation. It matters where property is transferred within a group with group relief, then moved again within the group, and the company now holding the property is sold out of the group within 3 years. In some cases, the usual clawback rule does not catch the arrangement because of the order of the transactions. This rule is designed to deal with that gap.

What this rule is about

Group relief can remove SDLT on certain transfers of land between companies in the same group. But that relief is not meant to be a way of moving land out of a group tax-free by first transferring the property around inside the group and then selling the company that holds it.

The normal clawback rule in Schedule 7 paragraph 3 Finance Act 2003 can charge SDLT if, within 3 years, the purchaser leaves the group. But some transaction sequences can avoid that result. In particular, the company that ends up holding the land may not be the original purchaser that claimed group relief, and may not fall within the paragraph 3 rule in the usual way.

Paragraph 4A addresses that problem. It applies a clawback where there has been a prior relieved acquisition of the same chargeable interest, or a derived chargeable interest, and the later change of control would otherwise escape the ordinary clawback rule.

What the official source says

The HMRC manual says paragraph 4A applies where all of the following are present:

• there is a change of control of the purchaser;
• that happens within 3 years of the effective date of the relevant transaction, or under arrangements made within that 3-year period;
• the ordinary paragraph 3 clawback does not apply; and
• within the 3 years before the change of control, there was at least one earlier transaction involving the same chargeable interest, or a derived chargeable interest, for which group relief was claimed.

If those conditions are met, the clawback provisions are applied by treating the parties as if they were the vendor in the earliest earlier transaction and the purchaser in the latest transaction.

The manual gives a typical example:

• Company A owns Company B, which owns Company C.
• A transfers land to C and claims group relief. This is the “drop”.
• C then transfers the same land, or a derived chargeable interest in it, to B. This is the “bounce”.
• A then sells the shares in B to an outside buyer within 3 years of the transfer to B.

The point of paragraph 4A is that, even though B was not the original purchaser on the relieved transfer from A to C, the legislation can still impose a clawback.

What this means in practice

You cannot assume that SDLT group relief is safe simply because the company that originally acquired the property is not the company that later leaves the group.

If land is transferred intra-group with group relief, then passed again within the group, and the company now holding that land is sold out of the group within 3 years, HMRC may still treat the arrangement as one that should suffer a clawback charge.

In practical terms, this means:

• later intra-group transfers do not necessarily break the link with the original relieved transfer;
• selling a different group company from the original purchaser may still trigger a charge;
• the legislation looks at the sequence as a whole, not just at one isolated transfer; and
• conveyancers and tax teams need to review the history of the property within the group for the previous 3 years before any share sale.

This is particularly important in corporate reorganisations where land has been “dropped down” into a subsidiary and later “bounced” up or across before a disposal of shares.

How to analyse it

A sensible way to analyse the rule is to work through these questions:

1. Was there a transfer of a chargeable interest within a group for which group relief was claimed?
2. Was there then another transaction involving the same chargeable interest, or a derived chargeable interest?
3. Which company held the relevant interest immediately before the share sale or other change of control?
4. Did that company leave the original SDLT group within 3 years of the effective date, or under arrangements made within that period?
5. Would the ordinary paragraph 3 clawback fail to apply because the company leaving the group was not the original purchaser, or not a relevant associated company to that purchaser?
6. If so, does paragraph 4A reconnect the chain by looking back to the earliest relieved transaction and forward to the latest transaction?

The key practical exercise is tracing both the land and the group structure over the relevant 3-year period. You need to identify not just who bought the land first, but how the interest moved afterwards and which company is being sold.

Example

Illustration:

Parent company A owns B, and B owns C. A transfers freehold land to C and claims group relief. Later, C transfers the land to B. A then sells B to an unconnected buyer within 3 years.

If you looked only at the original relieved transfer, the company leaving the group is B, not C. That may mean the ordinary clawback rule in paragraph 3 does not work in the usual way. Paragraph 4A is intended to deal with that. It can impose a clawback by treating the sequence as one to which the clawback rules should apply, despite the intermediate transfer.

Why this can be difficult in practice

The difficult part is usually not the broad purpose of the rule, but identifying whether the exact statutory conditions are met.

In particular:

• the transaction history may be more complex than a simple drop-and-bounce;
• it may not be obvious whether a later interest is the same chargeable interest or a derived chargeable interest;
• timing matters, including whether the change of control happened within 3 years or under arrangements made within that period; and
• the relationship between paragraph 3 and paragraph 4A must be considered carefully, because paragraph 4A is aimed at cases where paragraph 3 does not already do the job.

The HMRC manual gives the policy direction and a simple example, but the detailed result in a real transaction depends on the exact legal steps taken and the order in which they happened.

Key takeaways

• Group relief can be clawed back even if the company sold out of the group was not the original purchaser on the relieved transfer.
• Paragraph 4A is aimed at “drop and bounce” style arrangements that might otherwise escape the normal paragraph 3 clawback.
• Before selling a property-holding group company, review all intra-group land transfers and relief claims in the previous 3 years.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on SDLT Group Relief Clawback for Transfers Within Three Years

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