Guidance on SDLT Group Relief Withdrawal and Recovery Procedures from Other Parties

Recovery of Unpaid SDLT After Group Relief Is Withdrawn

If SDLT becomes payable because group relief is later withdrawn, the purchaser is still the main party liable to pay it. However, if the tax remains unpaid for six months after it becomes due, HMRC can in some cases recover the unpaid tax and interest from other connected persons, including the vendor, certain parent or intermediate group companies, and some controlling directors, provided HMRC serves a valid notice within the legal time limit.

• The purchaser is primarily liable for SDLT after group relief is withdrawn, but liability can extend to others if the tax is not paid.
• HMRC may pursue the vendor, companies above the purchaser in the 75% group chain, and certain controlling directors connected with the purchaser or its controlling company.
• The relevant connection must have existed at some point between the transaction date and the date the purchaser left the vendor’s group.
• HMRC can only use this recovery power after the SDLT has been determined, remained unpaid for six months, and a notice has been served requiring payment within 30 days.
• The notice must be served within three years from the date the tax was finally determined and can include interest as well as the unpaid SDLT.
• A person who pays under the notice can seek reimbursement from the purchaser, but no tax deduction is allowed for that payment and recovery may be difficult if the purchaser is insolvent.

Scroll down for the full analysis.

When unpaid SDLT after withdrawal of group relief can be recovered from other people

This page explains what happens if group relief is later withdrawn and the resulting SDLT is not paid. The normal rule is that the purchaser is liable for the tax. But if that tax remains unpaid for long enough, HMRC can pursue certain other people connected with the transaction or the group. This matters because liability can spread beyond the buying company itself.

What this rule is about

Group relief can reduce or remove SDLT on transfers within a corporate group. If the conditions for that relief later fail, the relief can be withdrawn and SDLT becomes payable.

The legislation then deals with a practical enforcement problem: what if the purchaser does not pay that SDLT? The rule allows HMRC, in certain circumstances, to recover the unpaid amount from other specified persons.

This is not the starting position. The purchaser remains primarily liable. Recovery from others only becomes relevant once the SDLT due on withdrawal has been established and has remained unpaid for a set period.

What the official source says

The source says that once the SDLT due because of a withdrawal of group relief has been determined, liability to pay it rests with the purchaser.

If all or part of that tax has not been paid within six months after it became payable, HMRC may recover the unpaid amount from certain other persons. Those persons are:

• the vendor;
• any company which, at any relevant time, was in the same group as the purchaser and was above the purchaser in the group structure; and
• any person who, at any relevant time, was a controlling director of the purchaser or of a company that had control of the purchaser.

For this purpose, a company is above another company in the group structure if the lower company, or another company above it, is a 75% subsidiary of the higher company.

The relevant time is any time between the effective date of the transaction and the date on which the purchaser stopped being in the same group as the vendor.

The source also defines director and controlling director by reference to tax legislation. In broad terms, the rule looks to directors who had control of the company.

To recover the tax from one of these other persons, HMRC must serve a notice. The notice must:

• require payment within 30 days of service;
• be served within three years beginning with the date the tax was finally determined;
• state the amount to be paid; and
• operate, for recovery and appeal purposes, as if it were an assessment on that person.

The notice can cover not only the unpaid tax but also interest on that unpaid tax.

If a person pays under such a notice, that person has a legal right to recover the amount paid from the purchaser. The source also states that no tax deduction is allowed, in computing income, profits or losses, for the amount paid.

What this means in practice

The main practical point is that a failure by the purchaser to pay SDLT after group relief is withdrawn does not necessarily leave HMRC limited to that purchaser.

Other parties may be exposed if they fall within the statutory categories. That exposure is potentially important for:

• vendors in intra-group transfers;
• parent or intermediate group companies above the purchaser; and
• individuals who were controlling directors during the relevant period.

This means the risk of a later withdrawal of group relief is not confined to the company that acquired the property. In a distressed group, or where companies are sold, liquidated or reorganised, HMRC may look beyond the purchaser if the SDLT remains unpaid for six months.

The rule does not say that all connected persons automatically become jointly liable from the outset. HMRC must first be able to identify unpaid SDLT that has become payable and remained unpaid for six months, and must then serve a valid notice on the person it wishes to pursue.

The person served with the notice is not left without recourse. If they pay, they are entitled to recover that amount from the purchaser. But that right may be of limited practical value if the purchaser has no assets or no longer exists in any meaningful commercial sense.

How to analyse it

A sensible way to analyse the position is to work through these questions in order.

• Has group relief actually been withdrawn, so that SDLT has become payable?
• Has the amount of SDLT been determined? The source refers to determination by passage of time, closure of an enquiry, or otherwise.
• Has all or part of that SDLT remained unpaid for six months after the date it became payable?
• Who falls within the statutory recovery categories: vendor, companies above the purchaser in the group, or controlling directors?
• Did that person have the necessary connection at a relevant time, meaning between the effective date of the transaction and the date the purchaser left the vendor’s group?
• Has HMRC served a notice within the three-year time limit running from final determination of the tax?
• Does the notice clearly state the amount due and require payment within 30 days?

For group companies, the key structural question is whether the company was above the purchaser in a 75% group chain at a relevant time.

For individuals, the key question is not simply whether they were a director. The source points specifically to a controlling director of the purchaser, or of a company controlling the purchaser, using statutory control tests.

For anyone served with a notice, there are really two separate issues:

• whether HMRC has validly brought them within the recovery rule; and
• if payment is made, whether and how they can recover that amount from the purchaser.

Example

This is an illustration of how the rule can work.

Company P owns Company B, which buys property from another group company and claims group relief. Later, the conditions for group relief cease to be met, so relief is withdrawn and SDLT becomes payable by B. The amount of SDLT is determined, but B does not pay it. Six months pass.

At that point, HMRC may be able to pursue not only B, but also the vendor, and also P if P was above B in the group structure at a relevant time. If an individual was a controlling director of B, or of a company controlling B, during the relevant period, that individual may also fall within the recovery rule.

HMRC would need to serve a notice on the person it wants to recover from. That notice must require payment within 30 days and must be served within the statutory time limit. If P pays under the notice, P can seek reimbursement from B.

Why this can be difficult in practice

The source sets out the recovery mechanism, but applying it can still be fact-sensitive.

First, the timing matters. You need to identify when the tax became payable, when it was finally determined, and whether the six-month and three-year periods have been met. Those dates may not always be obvious where there has been correspondence, an enquiry, or partial payment.

Second, group structure can be more complicated than it first appears. Whether a company was above the purchaser in the group structure depends on the statutory 75% subsidiary relationship. In layered groups, that may require careful tracing through the ownership chain.

Third, the director category is narrower than simply being on the board, but wider than everyday usage might suggest because the source imports statutory definitions. Whether someone was a controlling director may require a separate control analysis under the corporation tax rules referred to.

Fourth, the right of recovery against the purchaser may be legally clear but commercially weak. If the purchaser is insolvent or has been stripped of assets, the person who pays may have little practical chance of being reimbursed.

Finally, this rule concerns recovery of unpaid tax after withdrawal of group relief. It does not change the basic point that the purchaser is the primary taxpayer. The extended recovery mechanism is a secondary enforcement tool, not the original charging rule.

Key takeaways

• After withdrawal of group relief, the purchaser is primarily liable for the SDLT.
• If that SDLT remains unpaid for six months, HMRC may recover it, with interest, from the vendor, certain group companies above the purchaser, or certain controlling directors.
• HMRC must use a notice procedure, and anyone who pays under the notice can recover the amount from the purchaser, although that may be difficult in practice.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on SDLT Group Relief Withdrawal and Recovery Procedures from Other Parties

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