Read the original guidance here:
HMRC SDLT: Understanding Group Relief for SDLT: Transfer Between E Ltd and B Ltd

Understanding Group Relief for Stamp Duty Land Tax (SDLT)

When a company transfers property or other assets, it could trigger Stamp Duty Land Tax (SDLT) charges. However, group companies can sometimes avoid these charges through something called ‘group relief.’ This guidance explains how group relief works and the requirements that must be met for it to apply.

What is Group Relief?

Group relief allows certain transactions between group companies to be exempt from SDLT.

Key points about group relief include:
– Transfer of Interests: It applies to the transfer of a ‘chargeable interest’ between companies in a group.
– Nature of the Companies: Both companies involved must be corporate bodies and meet specific ownership criteria.
– 75% Ownership Test: To qualify, one company must have at least 75% beneficial ownership of the other company.

Situation Example

Consider the following example:
– There is a transfer of a chargeable interest from E Ltd to B Ltd.
– In this case, E Ltd is a company that will transfer its property or other assets to B Ltd.

It’s important to note that the provisions of Schedule 15 of the SDLT legislation do not apply here. Schedule 15 relates to transfers involving partnerships, and that does not apply in this situation since we are dealing exclusively with corporate entities.

Application of Group Relief

In this example, we will examine how to apply the rules from Schedule 7 of the SDLT legislation.

Conditions for Group Relief

To confirm whether group relief can be applied when E Ltd transfers an asset to B Ltd, the following conditions must be satisfied:

– Group Company Status:
– B Ltd and C Ltd must be subsidiaries of A Ltd.
– Since B Ltd owns 100% of E Ltd and C Ltd also owns 100% of E Ltd, this creates a group as per SDLT guidelines.

– 75% Beneficial Ownership:
– For B Ltd to benefit from group relief, at least 75% of E Ltd’s ownership must be attributed to either A Ltd or the other company in the group.

In this scenario:

– B Ltd owns 50% of E Ltd.
– C Ltd also owns 50% of E Ltd.
– Since both B Ltd and C Ltd are subsidiaries of A Ltd, this establishes a clear relationship within the group.

How Group Relief Works

When all necessary conditions are met, group relief provides an exemption from the market value charge of SDLT during the transfer process.

Key steps to take:

– Verify ownership structures within the group.
– Ensure that the ownership distribution meets the 75% test.
– Confirm that the companies qualify as group companies under the SDLT rules.

If these criteria are met, properties or assets transferred can be eligible for relief under the rules set out in Schedule 7, paragraph 2 of the SDLT legislation.

Implications of Group Relief

The benefit of group relief can significantly reduce or eliminate SDLT liability for transferring assets between corporate entities within a controlled group.

Points to consider:

– Financial Savings: Companies can save money on SDLT charges, freeing up resources for other business activities.
– Complex Structures: Larger groups may have intricate ownership structures. An understanding of these can help ensure that benefits are fully realised under the SDLT rules.

An example to illustrate this point:

– If E Ltd sells a property worth £1 million to B Ltd, SDLT would ordinarily be charged on this transfer.
– However, as long as the conditions for group relief are met, B Ltd can transfer the property without incurring SDLT liabilities.

Final Considerations

When approaching transactions involving group companies, businesses must undertake careful planning.

They should:

– Consult SDLT Regulations: Always review the specific requirements under the SDLT legislation to ensure compliance.
– Document Ownership Structures: Maintain clear and comprehensive records of ownership to support any claims for group relief.
– Seek Professional Advice: It may be useful to consult legal or accounting experts familiar with SDLT to navigate complex transactions accurately.

By accurately applying these principles, companies can leverage group relief effectively, allowing for smoother transactions and better financial management.