Stamp duty on a unit trust property distribution: HMRC’s section 75A example
In short
HMRC’s example shows that section 75A can impose SDLT on a notional direct transfer where a unit trust distributes land and one group company later buys the final share.
- The actual distribution is for no payment.
- The actual 1% transfer can have group relief.
- HMRC says group relief is unavailable on the notional transfer from the unit trust.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on a unit trust property distribution: HMRC’s section 75A example
Stamp duty on a unit trust property distribution
Moving a property out of a unit trust for no payment can appear free of stamp duty. HMRC’s example explains why that may not be the final position. Even a later transfer of a small share can bring the section 75A anti-avoidance rule into play.
What this rule is about
The trust owns one £20 million property. Two companies own all its units: one has 99% and the other has 1%.
Both companies sell their units to two other companies in the same group. The trust then gives the property to its new unit holders and closes down.
It appears straightforward. It is not.
After the distribution, once the company with 99% of the units has received its corresponding share, it owns 99% of the property and buys the remaining 1% from the other company for £200,000, equal to 1% of £20 million. It then owns the whole property.
The key issue is whether stamp duty should consider only each land transfer. Or, when the connected steps are viewed together, should it examine the overall route by which one company ended up with the whole property? That is the question.
What the official source says
HMRC’s manual gives different SDLT results for the actual steps. Because the property distribution is for nothing, HMRC says no SDLT is due on that step.
- The unit transfers come first, but HMRC says section 75A ignores them when testing this arrangement.
- The trust gives 99% of the property to Estate 1 Limited.
- The trust gives the remaining 1% to Estate 2 Limited.
- Estate 1 Limited then buys that 1% interest from Estate 2 Limited for £200,000.
- HMRC says the two estate companies can claim group relief on that last transfer, because they are in the same SDLT group.
That is the outcome when each land step is considered separately. The distribution involves no payment, while group relief applies to the paid 1% transfer.
Section 75A may instead take a broader view. It applies where a connected series of steps leaves less SDLT payable than a notional direct transfer from the original owner to the final owner.
For HMRC’s analysis, Mansion Unit Trust is the original owner. Estate 1 Limited is the final owner, as it ends up with 100% of the property.
- The notional transfer is from Mansion Unit Trust to Estate 1 Limited.
- It covers the whole property, not merely the final 1% share.
- Its value is based on the largest amount paid in the relevant steps.
- Here, HMRC identifies that amount as the £200,000 paid for the 1% interest.
- HMRC says the notional transfer keeps the character of a distribution.
- On the stated facts, HMRC says that the statutory distribution exception, because the notional transfer retains the character of a distribution, prevents a market-value charge. That exception matters.
Group relief creates the important distinction. It can apply to the actual 1% transfer between the two estate companies. HMRC says it cannot apply to the notional transfer, which is treated as a transfer from the unit trust to Estate 1 Limited.
A unit trust is generally treated like a company for SDLT. The law, however, specifically says that it is not a company for group relief.
What this means in practice
You cannot safely determine the SDLT result by adding the tax on the documents that transfer land. Once section 75A creates its notional direct transfer, a series may produce a different result.
This does not mean that every trust distribution triggers extra tax. It means that the complete sequence matters, particularly where one group company finishes with all the property.
- Check who owned the land at the start.
- Check who owns it at the end.
- List every step that links the starting and ending positions.
- Include unit sales and other non-land steps in that list.
- Record every payment, loan release and assumed debt.
- Do not assume group relief carries over to a notional transfer.
The decisive detail in this example is easy to overlook: the 1% transfer is group-relieved in real life, but that same relief is unavailable for HMRC’s notional transfer.
How to analyse it
Begin with the real-world transfers. Then step back and test the whole arrangement. The order matters because section 75A compares the SDLT due on the real steps, taken together, with the SDLT due on a notional direct transfer between the relevant parties. That is the required comparison.
- Identify the property interest held before the arrangement begins.
- Identify the person who ultimately ends up with that interest, or one derived from it.
- Map the unit sales, distribution, transfers and winding-up in date order.
- Work out the SDLT result for every actual land transfer.
- Check whether an exemption or group relief applies to each actual transfer.
- Test whether section 75A treats the sequence as a notional direct transfer.
- Find the largest relevant amount paid in the whole sequence.
- Test relief again for the notional transfer, using its notional parties.
What payment counts? In this example, when identifying the relevant amount paid across the sequence rather than considering only the distribution, HMRC uses the £200,000 paid by Estate 1 Limited for the final 1% interest. That is the amount used.
Example
Imagine a debt-free unit trust owning a £20 million property. Anna Estate Ltd holds units worth 99% of the trust, while Ben Estate Ltd holds the other 1%, so the two companies hold all its units. Those are the proportions.
Two group companies buy those units. With no payment made when the trust distributes the property, it transfers 99% to Estate 1 Ltd and the remaining 1% to Estate 2 Ltd. No payment is made. Estate 1 Ltd buys the final 1% from Estate 2 Ltd for £200,000.
HMRC’s example says that the no-payment distribution has no SDLT. It also says that group relief removes SDLT from the actual £200,000 transfer between the two estate companies.
HMRC nevertheless then applies section 75A. It treats Estate 1 Ltd as making a notional purchase of the whole property from the unit trust, with £200,000 as the relevant amount paid.
HMRC says the comparison test is met because more SDLT is due on that notional transfer than on the actual land transfers. No final cash SDLT figure appears. Do not use this example to calculate one.
Why this can be difficult in practice
Trust and group structures require more paperwork. The short example can conceal that. A single missing fact can change the analysis.
Debt provides a good example. HMRC’s example expressly says the trust is debt-free and has no loans outstanding. If debt moves, is released or is taken on, the amount treated as paid may differ.
- A unit sale is not automatically irrelevant; section 75C says when it is ignored for this test.
- A property distribution for no cash may still need checking against the connected-company market-value rule.
- The statutory distribution exception has its own conditions.
- Companies described as part of one group must meet the SDLT group test at the relevant time.
- Group relief can be restricted or withdrawn in some circumstances.
- The identity of the original owner and final owner must be established from the legal documents.
You might regard the 99% and 1% split as merely a drafting detail. In this case, it explains the £200,000 payment. It also explains why Estate 1 Limited ends up with the whole property.
Key takeaways
- A nil-payment trust distribution may have no SDLT on its own.
- Group relief on a real transfer may not apply to a section 75A notional transfer.
- For a unit trust structure, map every step before reaching an SDLT answer.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 section 43 — what counts as a land transaction
- FA 2003 Schedule 3 para 1 — exemption where nothing is paid
- FA 2003 section 53 — market value rule for connected companies
- FA 2003 section 54 — exception for company asset distributions
- FA 2003 section 75A — when the anti-avoidance rule applies; the notional direct land transaction; how value is set for the notional deal
- FA 2003 section 75C — ignoring share transfers in the sequence
- FA 2003 section 101 — how unit trust schemes are treated; why unit trusts cannot use group relief
- FA 2003 Schedule 7 para 1 — group relief for transfers between group companies
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The manual does not state the type of property or the SDLT rate used for the notional transaction.
- A real arrangement may have different documents, debt, payment flows or group arrangements, which can change the result.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The unit trust deed and documents distributing the property
- The contracts and completion papers for each unit and land transfer
- A group chart showing ownership at each relevant time
- Evidence of all payments, debts, loans and liabilities
- A valuation of each interest transferred
- Details of any earlier group-relieved land transfer involving the property
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty on a unit trust property distribution: HMRC’s section 75A example [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 section 43 - what counts as a land transaction https://www.legislation.gov.uk/ukpga/2003/14/section/43/2025-11-17 - FA 2003 Schedule 3 para 1 - exemption where nothing is paid https://www.legislation.gov.uk/ukpga/2003/14/schedule/3/paragraph/1/2025-11-17 - FA 2003 section 53 - market value rule for connected companies https://www.legislation.gov.uk/ukpga/2003/14/section/53/2025-11-17 - FA 2003 section 54 - exception for company asset distributions https://www.legislation.gov.uk/ukpga/2003/14/section/54/2025-11-17 - FA 2003 section 75A - when the anti-avoidance rule applies https://www.legislation.gov.uk/ukpga/2003/14/section/75A/2025-11-17 - FA 2003 section 75A - the notional direct land transaction https://www.legislation.gov.uk/ukpga/2003/14/section/75A/2025-11-17 - FA 2003 section 75A - how value is set for the notional deal https://www.legislation.gov.uk/ukpga/2003/14/section/75A/2025-11-17 - FA 2003 section 75C - ignoring share transfers in the sequence https://www.legislation.gov.uk/ukpga/2003/14/section/75C/2025-11-17 - FA 2003 section 101 - how unit trust schemes are treated https://www.legislation.gov.uk/ukpga/2003/14/section/101/2025-11-17 - FA 2003 section 101 - why unit trusts cannot use group relief https://www.legislation.gov.uk/ukpga/2003/14/section/101/2025-11-17 - FA 2003 Schedule 7 para 1 - group relief for transfers between group companies https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/1/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09400 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The manual does not state the type of property or the SDLT rate used for the notional transaction. - A real arrangement may have different documents, debt, payment flows or group arrangements, which can change the result. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 31 August 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty on a unit trust property distribution: HMRC’s section 75A example
Search Land Tax Advice with Google
