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HMRC SDLT: SDLTM23012 – Reliefs: Group Tax Bulletin article: How to claim group relief in stamp duty land tax

How to Claim Group Relief in Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) is a tax that is due when you purchase or transfer a property. One of the ways that businesses can potentially reduce their tax burden is by claiming group relief. This guide explains the key aspects of claiming group relief in SDLT, the necessary forms, and how the process works.

What is Group Relief?

Group relief allows certain companies in the same group to benefit from tax relief when transferring property between them. This means that a group of companies can transfer properties without incurring SDLT, provided the transfer meets specific criteria.

Eligible Companies for Group Relief

To qualify for group relief, the companies involved must be:

– Related entities: The companies must be within the same corporate structure.
– In a group: This usually means a parent company and its subsidiaries, where the parent owns at least 75% of the subsidiary.

For example, if Company A owns 80% of Company B and Company C, any transfer of property between these companies may qualify for group relief.

How to Make a Claim for Group Relief

When making a claim for group relief in SDLT, there are specific steps to follow:

1. Use the correct form: Claims are to be made using the standard SDLT form, which is SDLT1. An electronic version is also acceptable. When completing the form, you will need to use code 12 to indicate that you are claiming group relief.

2. Do not include supporting documents: Unlike some other claims, you are not required to submit additional documents with your claim for group relief. The process is simplified, and you only need to complete the form and submit it.

3. Self-assessment of the claim: The responsibility for determining whether your claim is valid lies with the companies involved. This self-assessment requires you to ensure that all conditions for group relief are met before submission.

Processing and Certificates

Once your SDLT1 form is submitted, the following will happen:

– Issuance of Revenue Certificate (Form SDLT5): If your land transaction return is complete, HM Revenue & Customs (HMRC) will issue a certificate (form SDLT5) which allows you to register the title of the property. This certificate is issued regardless of any inquiries HMRC may want to make regarding the transaction or your claim for group relief.

– ‘Process Now, Check Later’ Approach: Group relief claims are processed based on a system where claims are accepted first and verified later. This means that even if HMRC has questions about the transaction, it won’t hold up the issuing of the certificate.

Addressing Errors and Responsibilities

Although you are allowed to submit your claim without additional documents, it is essential to be accurate in your submissions:

– Self-Assessment: As mentioned, companies are responsible for determining the validity of their claims. This means that if a mistake is made in your SDLT return, including errors in claiming group relief, you may be liable for any tax owed.

– Penalties for Under-Declared Tax: HMRC can assess and collect any tax that was under-declared due to negligence. This includes imposing penalties if it is discovered that there were errors in returns or if fraud is suspected.

Important Points to Remember

Here are some key points to remember when claiming group relief:

– Ensure that all companies involved in the property transfer qualify under the group relief criteria.
– Accurately complete the SDLT1 form and correctly indicate group relief with code 12.
– Do not submit any additional documents with your claim.
– Be aware that HMRC processes the claims on a ‘process now, check later’ basis.
– You are liable for the correctness of your claim, so ensure you have made a thorough assessment.

Example of Group Relief Claim

Let’s consider a practical example:

– Company A owns 100% of Company B. If Company B decides to transfer a commercial property to Company A, they can fill out the SDLT1 form and claim group relief by using code 12.

The claim is self-assessed, meaning Company B must ensure that all conditions for group relief are satisfied before submitting the form. After submission, HMRC will process the application, and if there are no issues, Company A will receive the SDLT5 certificate to allow them to register the property in their name.

However, if Company B misrepresents any details in their claim or neglects to fully assess its eligibility, HMRC may later audit the return and could impose penalties or require additional taxes owed.

Possible Inquiries from HMRC

Although HMRC processes the claims quickly, there may still be instances where they look into specific claims. They might want to clarify details about the transaction or the companies involved. This should not delay the issuance of the SDLT5 certificate.

– If you receive an inquiry, you need to respond promptly and provide any requested information.
– Ensure that all the details and evidence of your claim are correct and readily available in case of any verification from HMRC.

Final Considerations for Companies

For companies wishing to take advantage of group relief, it’s vital to ensure that:

– All involved parties understand the eligibility criteria.
– The transfer meets all necessary conditions for group relief to apply.
– The SDLT1 form is completed accurately and submitted in a timely manner.

Taking these steps can help businesses rightly leverage group relief in a manner consistent with the SDLT regulations.