Example 3: SDLT Implications for Property Transfer Between Connected Companies

SDLT on a Nil-Value Transfer of Residential Property Between Connected Companies

When one company transfers a freehold residential property to another company for no payment, the SDLT position depends on whether the two companies are connected under section 1122 of the Corporation Tax Act 2010. If they are connected, SDLT is based on the property’s market value at the effective date of the transaction. If they are not connected, the source says there is no chargeable consideration and no SDLT notification is required.

• A transfer for no consideration is not automatically outside SDLT.
• The key test is whether the transferor and transferee companies are connected under section 1122 CTA 2010.
• If the companies are connected, section 53 applies and market value replaces the nil price as the chargeable consideration.
• The market value must be assessed at the effective date of the transaction.
• If the companies are not connected, the source says there is no chargeable consideration and no SDLT return is needed on those facts.
• This is especially important for group reorganisations, common-control transfers, and other company restructurings involving property moved without payment.

Scroll down for the full analysis.

SDLT on a transfer of residential property to a connected company for no consideration

This page explains what happens for SDLT purposes when one company transfers a freehold residential property to another company and no money is paid. The key issue is whether the two companies are connected. If they are, SDLT is charged by reference to market value rather than the amount actually paid. If they are not connected, the official source says there is no chargeable consideration and no notification is required.

What this rule is about

SDLT is usually charged on chargeable consideration. In many transactions, that means the price paid. But some transactions between connected parties are treated differently. The rule discussed here is aimed at a transfer of residential property from one company to another where the transfer is made for no consideration.

The legal question is not simply whether money changed hands. It is first necessary to ask whether the transferor company and the transferee company are connected within section 1122 of the Corporation Tax Act 2010. If they are connected, a market value rule applies. If they are not, the absence of consideration means there is no chargeable consideration on the facts given in the source.

What the official source says

The source gives a short example:

• Company C transfers freehold residential property to company B.
• No consideration is given.
• The first question is whether C is connected with B under section 1122 CTA 2010.
• If C is not connected with B, there is no chargeable consideration and no notification is required.
• If C is connected with B, section 53 applies and the chargeable consideration is the market value of the property at the effective date of the transaction.
• The example states that if the market value at that date is £275,000, that is the amount treated as chargeable consideration.

The source is therefore drawing a sharp distinction between unconnected company-to-company transfers for no consideration and connected company transfers for no consideration.

What this means in practice

In practical terms, a nil-price transfer between companies is not automatically outside SDLT. The tax result depends on the relationship between the companies.

If the companies are connected, SDLT is not based on the actual price paid, because there is none. Instead, the law substitutes the property’s market value at the effective date. That can produce an SDLT charge even though no money is changing hands.

If the companies are not connected, the source says there is no chargeable consideration. On the facts of this example, that means no SDLT return is required.

This matters particularly in group reorganisations, transfers between companies under common control, and informal restructurings where property is moved without payment. A transfer that looks tax-free in commercial terms may still carry an SDLT charge if the companies are connected.

How to analyse it

A sensible way to approach this type of transaction is to work through four questions.

1. What exactly is being transferred?

   The example concerns a freehold residential property. The nature of the land interest and whether it is residential are part of the factual background.

2. Is any consideration being given?

   In the example, the transfer is for no consideration. That is the starting point, but not the end of the analysis.

3. Are the companies connected under section 1122 CTA 2010?

   This is the critical gateway question. The source does not explain the detailed test, but it makes clear that the SDLT treatment turns on that connection test.

4. If they are connected, what is the market value at the effective date?

   If section 53 applies, market value becomes the chargeable consideration. The valuation must be taken at the effective date of the transaction, not at some earlier or later point.

For conveyancing and compliance purposes, this means the parties should not stop at the transfer document or the stated price. They need to identify the corporate relationship and, if necessary, obtain a supportable market valuation as at the effective date.

Example

Illustration: Company C transfers a freehold residential property to Company B. Company B pays nothing for it.

If C and B are not connected, the source says there is no chargeable consideration and no notification is required.

If C and B are connected, section 53 applies. If the property’s market value at the effective date is £275,000, SDLT is worked out using £275,000 as the chargeable consideration, even though the actual price is nil.

Why this can be difficult in practice

The source example is simple, but real cases may be less straightforward.

First, whether companies are connected can be a technical question. The answer depends on the statutory test in section 1122 CTA 2010, not on loose commercial language such as being in the same group or having similar ownership.

Second, market value can be contentious. If section 53 applies, the amount charged to SDLT depends on the market value at the effective date. That may require evidence, especially where the property is unusual or where the transfer takes place as part of a wider reorganisation.

Third, the example only deals with a transfer for no consideration. It does not address other possible forms of consideration or wider SDLT issues that may arise in different factual situations. The result should therefore be applied carefully and only to the type of case covered by the source.

Key takeaways

• A nil-consideration transfer of residential property between companies can still attract SDLT if the companies are connected.
• The key legal question is whether the companies are connected under section 1122 CTA 2010.
• If they are connected, section 53 substitutes market value at the effective date as the chargeable consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example 3: SDLT Implications for Property Transfer Between Connected Companies

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