Read the original guidance here:
HMRC SDLT: SDLTM34440 – Application of exemptions and reliefs: Group Relief

Understanding Group Relief for Stamp Duty Land Tax (SDLT)

This article provides clear guidance on the concept of group relief in relation to Stamp Duty Land Tax (SDLT), specifically under the context of company law and asset transfers. The focus will be on the conditions that must be met for a transfer of property between companies within the same corporate group to qualify for group relief.

Transfer Example

Let’s look at a specific example to illustrate this concept:

• Transfer Scenario: E Ltd is transferring a chargeable interest (which is generally property or land) to B Ltd.

For further details about the structure of this transaction, we refer to SDLTM34410.

Understanding the Legal Framework

In this situation, the provisions under Schedule 15 do not apply. This is because Schedule 15 discusses transfers involving partnerships, and this transfer does not involve any partners.

Moving to Schedule 7

Therefore, we turn our attention to Schedule 7, which is critical for understanding how group relief works when transferring assets between group companies.

Conditions for Group Relief

For a transfer to qualify for group relief under SDLT, certain conditions must be met. Here are the key requirements:

• Group Companies: The transfer must occur between companies that are part of the same corporate group.
• Body Corporate Requirement: At least one of the companies involved must be a ‘body corporate’. This refers to a legal entity such as a limited company.
• 75% Beneficial Ownership: There must be at least 75% beneficial ownership between the companies involved in the transfer. This means that one company must hold a significant portion of the ownership in the other.

Understanding Partnership Structures

In the case of a Limited Partnership (LP) or a Scottish Limited Partnership (Sc LP), it is important to note that these entities have their own legal personality. This means that the transfer involves the entity itself rather than its partners.

• Identification of Group Structure: If the companies involved include an SP/Sc LP, it is necessary to correctly identify how these partnerships fit into the group structure.

Since an SP/Sc LP is not classified as a body corporate, it does not meet the requirements laid out in Schedule 7 for group relief to apply.

Tax Implications for the Transaction

As a result of the above conditions not being satisfied, SDLT will be applicable on the transaction without the benefit of group relief. Here’s a summary of the tax implications:

• SDLT Liability: SDLT is due because the transfer is occurring from one company to another without qualifying for group relief.

Conclusion of the Example

In this example, since E Ltd is transferring a chargeable interest to B Ltd, and does not satisfy the group relief conditions outlined in Schedule 7, SDLT is applicable on the transfer. It is essential for businesses to understand these principles to ensure compliance and proper financial planning.

For further assistance or detailed inquiries related to SDLT and group relief, it is recommended to consult with a tax professional or refer to specific guidance under the HMRC.