Guide on Reconstruction and Acquisition Relief for Company Undertakings Transfer

SDLT anti-avoidance and company transfers of an undertaking

When one company transfers all or part of its business to another, SDLT reconstruction relief or acquisition relief may be available under Schedule 7 Finance Act 2003. However, if linked “scheme transactions” fall within section 75C, the law can create a notional land transaction that must be considered when deciding whether those reliefs apply.

• Schedule 7 includes reconstruction relief and acquisition relief for certain company reorganisations involving the transfer of all or part of an undertaking.
• If section 75C applies, HMRC treats the resulting notional transaction as a land transaction for the purposes of those reliefs.
• This means you must look beyond the main transfer document and review all connected steps and arrangements.
• The words “for the purposes of, or in connection with” are wide, so preparatory or supporting steps may also be relevant.
• The anti-avoidance rule does not automatically deny relief, but it can change which transaction is tested under the relief conditions.
• In practice, reorganisations involving land should be analysed as a whole, including any deemed transaction created by section 75C.

Scroll down for the full analysis.

When anti-avoidance rules treat a company transfer of an undertaking as a land transaction for SDLT group relief purposes

This page explains a narrow but important SDLT point. It concerns transfers of a company’s undertaking where reconstruction relief or acquisition relief might otherwise be in point under Schedule 7 to the Finance Act 2003. HMRC’s manual says that, if certain “scheme transactions” are entered into for the purposes of, or in connection with, the transfer of the whole or part of an undertaking, the anti-avoidance rules can treat the resulting notional transaction as a land transaction for the purposes of those reliefs. In practical terms, that means the anti-avoidance code can affect whether relief is available on a business reorganisation involving land.

What this rule is about

Schedule 7 to the Finance Act 2003 contains reliefs for some company reorganisations. Two of those are:

• reconstruction relief, in paragraph 7, and
• acquisition relief, in paragraph 8.

Both can apply where one company acquires the whole or part of the undertaking of another company. Where land is involved, these reliefs may reduce or remove SDLT that would otherwise arise.

The page you have provided is not setting out the full conditions for either relief. Instead, it deals with the interaction between those reliefs and section 75C FA 2003, which is part of the SDLT anti-avoidance rules. The key point is that the anti-avoidance rules may create a “notional transaction”, and that notional transaction is then treated as a land transaction for the purposes of paragraphs 7 and 8 of Schedule 7.

What the official source says

The official material says that if any scheme transactions are entered into for the purposes of, or in connection with, the transfer of the whole or part of an undertaking, then the notional transaction is a land transaction entered into for the purposes of paragraphs 7 and 8 of Schedule 7 FA 2003.

Put more simply, HMRC’s position is that you do not look only at the legal steps that directly transfer the business or assets. If section 75C applies because there are scheme transactions linked to that transfer, the law may construct a notional land transaction. That deemed transaction must then be taken into account when considering reconstruction relief or acquisition relief.

The source also points readers to HMRC’s material on:

• reconstruction relief,
• acquisition relief, and
• the meaning of “undertaking”.

That matters because this page assumes you already know when paragraphs 7 or 8 could potentially apply.

What this means in practice

If a business transfer between companies involves land, it is not enough to ask whether the transfer looks like a straightforward reconstruction or acquisition within Schedule 7. You must also ask whether section 75C recharacterises the arrangements because there are scheme transactions entered into for the relevant purpose or in connection with the transfer.

If it does, the anti-avoidance code may insert a notional land transaction into the analysis. That can affect how the relief rules apply.

The practical consequence is that a company reorganisation may need to be analysed at two levels:

• the actual legal steps that were carried out, and
• any notional land transaction that section 75C says should be treated as having taken place.

This is important because relief under Schedule 7 is tied to specific statutory conditions. If the anti-avoidance rules deem a land transaction to exist for those purposes, you cannot ignore it simply because no conventional conveyance took place in that form.

How to analyse it

A sensible way to approach this point is as follows.

• Identify whether there is a transfer of the whole or part of an undertaking from one company to another.
• Check whether reconstruction relief under paragraph 7 or acquisition relief under paragraph 8 is potentially relevant.
• Identify all the transactions, steps and arrangements connected with the transfer, not just the headline transfer document.
• Ask whether any of those are “scheme transactions” for the purposes of section 75C.
• Ask whether those scheme transactions were entered into for the purposes of, or in connection with, the transfer of the undertaking.
• If so, consider the effect of the notional transaction created by section 75C, and treat it as a land transaction for the purposes of Schedule 7 paragraphs 7 and 8.
• Then test the relief position on that basis, rather than by looking only at the form of the actual steps.

The phrase “for the purposes of, or in connection with” is broad. It suggests that the rule is not limited to steps that directly carry out the transfer itself. Connected preparatory or supporting steps may also matter, depending on the facts.

Example

Illustration: Company A transfers part of its business to Company B as part of a corporate reorganisation. The business includes land. On the surface, the parties expect to rely on Schedule 7 relief because the transfer is framed as an acquisition of part of an undertaking.

But suppose the reorganisation also includes other linked steps that fall within section 75C as scheme transactions and were entered into for the purposes of, or in connection with, that transfer. In that case, HMRC’s manual indicates that the resulting notional transaction is treated as a land transaction for the purposes of paragraph 7 or 8. The SDLT analysis must therefore include that deemed transaction when considering whether relief applies.

The point of the example is not that relief is automatically denied. It is that the anti-avoidance rule can change what transaction is tested under the relief provisions.

Why this can be difficult in practice

This area can be difficult because the manual page is short and depends on several other concepts that are not explained there.

• The meaning of “undertaking” can itself be important and fact-sensitive.
• The detailed conditions for reconstruction relief and acquisition relief sit elsewhere in Schedule 7.
• The operation of section 75C depends on identifying scheme transactions and understanding the statutory link between those transactions and the transfer.
• The phrase “in connection with” is potentially wide, so deciding how far the rule reaches may require careful analysis of the overall arrangement.

Another practical difficulty is that reorganisations are often implemented through multiple documents and steps. A reader who focuses only on the immediate transfer of the land or business may miss the wider statutory analysis. The anti-avoidance code may require you to view the arrangement as a whole.

Key takeaways

• Where a company acquires the whole or part of another company’s undertaking, Schedule 7 relief may be relevant, but section 75C can still affect the analysis.
• If there are scheme transactions entered into for the purposes of, or in connection with, the transfer, the notional transaction is treated as a land transaction for reconstruction relief and acquisition relief purposes.
• In practice, you must analyse the full arrangement, not just the formal transfer step, when considering SDLT relief on a corporate reorganisation.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Reconstruction and Acquisition Relief for Company Undertakings Transfer

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