Definitions and Guidelines for Freeports and Investment Zones Land Use Relief

Meaning of “qualifying use” terms for Freeports and Investment Zones SDLT relief

For SDLT Freeports relief and Investment Zones relief, some key terms used in the qualifying use rules do not have their ordinary meaning. Instead, they are taken from other tax laws, so you must check the statutory definitions of connected person, commercial, excluded rents, and property rental business before deciding whether relief applies or could later be withdrawn.

• Connected person follows section 1122 of the Corporation Tax Act 2010, so it can cover group companies, control relationships, and certain family or other legal connections.
• Commercial means an activity is carried on on a commercial basis and with a view to profit, not merely that money is paid or the arrangement looks business-like.
• Excluded rents has the same meaning as under section 133 of the Finance Act 2013 for ATED, so rental arrangements may need separate checking under those rules.
• Property rental business takes its meaning from Chapter 2 of Part 3 of ITTOIA 2005, not from everyday business language.
• When reviewing qualifying use, keep separate the site location, the actual use of the land, the relationship between the parties, and whether the activity is genuinely commercial.
• A claim can fail even if the land is in a special tax site, because the detailed facts and the imported definitions may show the statutory conditions are not met.

Scroll down for the full analysis.

Freeports and Investment Zones relief: what “qualifying use” terms mean

This page explains several definitions used when deciding whether land is used in a “qualifying manner” for SDLT Freeports relief or Investment Zones relief. The source material is short, but the definitions matter because they help determine whether the relief can apply and whether it can later be withdrawn.

What this rule is about

Freeports relief and Investment Zones relief depend on how land in a special tax site is used. The legislation uses a number of defined terms when describing that qualifying use. The page you provided does not set out the full qualifying use test. Instead, it explains the meaning of four building-block terms used within that test:

• connected person
• commercial
• excluded rents
• property rental business

These definitions matter because relief is not based only on where the land is. It also depends on what the land is used for, who is using it, and whether the activity is genuinely commercial.

What the official source says

The official material says the following.

• A connected person is someone connected to another person under section 1122 of the Corporation Tax Act 2010.
• Commercial, in this context, means carried out on a commercial basis and with a view to profit.
• Excluded rents for land in a special tax site have the same meaning as excluded rents for ATED under section 133 of the Finance Act 2013.
• Property rental business has the same meaning as in Chapter 2 of Part 3 of the Income Tax (Trading and Other Income) Act 2005.

So the SDLT rules are not creating fresh meanings here. They are importing definitions from other parts of the tax code.

What this means in practice

The practical point is that you cannot read the qualifying use rules in isolation. If a transaction depends on one of these terms, you need to apply the meaning taken from the other legislation referred to.

In practice, each definition does a different job:

Connected person is relevant because tax reliefs often restrict arrangements between related parties. If land is occupied, leased, or used by a person connected with the buyer or another relevant party, that may affect whether the statutory conditions are met. Whether people or companies are “connected” is a technical legal question. It is not limited to obvious family links. It can also include company control relationships and other statutory connections.

Commercial means more than simply carrying on an activity. The activity must be conducted on a commercial basis and with a view to profit. That points away from artificial, non-market, or purely tax-driven arrangements. It also means that a use does not become commercial just because some money changes hands. The wider facts matter.

Excluded rents matter where the land is being used for renting or letting. The legislation borrows a concept from the ATED rules to identify certain rents that are left out of account. If the land use involves rents, it may be necessary to ask whether those rents fall within the excluded category defined by the ATED legislation.

Property rental business takes its meaning from income tax law. This is important because not every receipt from land is necessarily part of a property rental business, and not every use of land amounts to carrying on a business of that kind. The tax meaning comes from the property income rules, not from everyday language.

How to analyse it

If you are checking whether land is used in a qualifying manner for Freeports or Investment Zones relief, a sensible approach is:

1. Identify the precise statutory condition you are testing. These definitions only help once you know which part of the qualifying use rules is in point.
2. Work out whether any person involved may be connected with another relevant person. Do not rely on ordinary language. Apply the statutory connection rules.
3. Ask whether the relevant activity is truly commercial. Look at the basis on which it is carried on and whether there is a real profit motive.
4. If the arrangement involves rents, check whether the rents are “excluded rents” by reference to the ATED definition imported into these rules.
5. If the arrangement is said to involve a property rental business, test that against the income tax meaning in the property income legislation, not against loose business usage.

It is also important to keep separate in your mind:

• the location requirement, such as being in a special tax site
• the nature of the land use
• the identity and relationship of the parties
• whether the activity is commercial in the statutory sense

A transaction may satisfy one of these points but fail another.

Example

Illustration: a company buys land in a special tax site and claims relief. It grants occupation of the site to another company in the same group. The use appears to be business-related, but the rent is set on unusual terms and the arrangement has little sign of genuine profit-making activity.

In that situation, several definition questions arise before concluding that the land is being used in a qualifying manner:

• Are the two companies connected persons under the corporation tax connection rules?
• Is the activity carried on commercially, meaning on a commercial basis and with a view to profit?
• If rents are involved, do any of them fall within the imported definition of excluded rents?
• Does the arrangement amount to a property rental business within the income tax meaning?

The answer would depend on the detailed facts and on the wider qualifying use provisions, not just on the label the parties give the arrangement.

Why this can be difficult in practice

The main difficulty is that the SDLT rule here is only a gateway to other legislation. The reader is sent to corporation tax, income tax, and ATED definitions. That creates room for error if someone assumes the words have their ordinary meaning.

There can also be factual judgement involved:

• Whether an activity is carried on on a commercial basis and with a view to profit can be straightforward in some cases, but marginal in others.
• Connection tests can be technical, especially where companies, participators, trustees, or family relationships are involved.
• Rental arrangements may need careful classification before deciding whether the rents are excluded rents.
• The boundary between simple land exploitation and a property rental business may depend on the exact nature of the receipts and activities.

So although the source page is brief, applying it properly may require careful cross-reference to the imported statutory definitions.

Key takeaways

• These terms are defined by reference to other tax legislation, not by ordinary language.
• “Commercial” means carried on on a commercial basis and with a view to profit.
• When testing qualifying use for Freeports or Investment Zones relief, you may need to analyse connected persons, rents, and property business treatment in detail.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Definitions and Guidelines for Freeports and Investment Zones Land Use Relief

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