Subsales and group relief: why a contract cannot simply avoid SDLT
The short answer
HMRC says SDLT does not need the old “resting on contract” rule because a contract can itself be taxed once it has been substantially performed.
- Group relief can be blocked by outside-group payments.
- Possession or payment of almost all the price can matter.
- Check the full chain of contracts, funding and group ownership.
Scroll down for the full analysis.
Read the original guidance here:
Subsales and group relief: why a contract cannot simply avoid SDLT
Subsales and group relief: why a contract cannot simply avoid SDLT
A contract cannot simply be left unfinished to avoid stamp duty land tax. HMRC says SDLT already deals with this where the contract has been substantially performed, such as when the buyer takes possession or pays almost all the price.
What this rule is about
Group relief can remove SDLT on a transfer of land between companies in the same group. It is meant for genuine internal moves of property, not a route for land or money to pass in and out of the group without tax.
The issue in this HMRC page is a subsale. In simple terms, that is where contracts or rights to buy land are used as part of a wider chain before the final transfer.
What the official source says
HMRC says Schedule 7 paragraph 2(2) reflects older stamp-duty rules. It blocks group relief where the arrangements involve an outside person providing or receiving all or part of the amount paid, or where the companies will cease to be in the same group in the specified way.
- The rule looks at the arrangements connected with the land transfer.
- It can matter if money comes from a person outside the group.
- It can also matter if money goes to a person outside the group.
- HMRC says an older separate rule was not carried into SDLT law.
That old rule dealt with a practice called “resting on contract”. HMRC’s view is that it was not needed for SDLT because section 44 already taxes a contract where it has been substantially performed before the final transfer.
What this means in practice
SDLT can arise before formal transfer. That is not always right. Possession or near-full payment can trigger SDLT early.
That distinction can decide whether a planned chain of steps works as expected.
- Check the whole plan, not only the document that transfers the land.
- Trace where every payment starts and ends.
- Check whether an outside company is funding the deal.
- Do not assume a delayed transfer means SDLT is delayed.
How to analyse it
Start with the facts in date order. The key question is not what the arrangement is called. Agreements and conduct determine the position.
- Confirm group status on the relevant date.
- Read the land contract and any side agreements together.
- Identify who provides the money and who receives it, directly or indirectly.
- Check for possession or near-full payment.
- Consider whether a later group change was already part of the plan.
Example
Illustration: Oak Ltd agrees to buy land from an unconnected seller. Before the formal transfer, Oak Ltd takes possession and pays almost all the agreed price. Even if the final paperwork happens later, section 44 can treat the contract as the SDLT event at the earlier point. Later internal transfers need separate group-relief analysis. That analysis includes the source and destination of any payments.
Why this can be difficult in practice
These arrangements can be complex. Contracts, companies, and payments can each affect the outcome. A payment may not be labelled as the price for the land, but it may still matter if it forms part of the wider arrangements.
- Possession can include a right to receive rent from the land.
- Indirect funding can be harder to spot than a direct payment.
- Documents may describe one plan while the money trail shows another.
HMRC’s manual explains its view of the law. The legislation remains the starting point, and the facts must be tested against it.
Key takeaways
- Group relief is not automatic for an internal company transfer.
- Outside-group money can prevent the relief from applying.
- A substantially performed contract can trigger SDLT before formal completion.
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 Schedule 7 para 1 — group relief for land transfers within corporate groups
- FA 2003 Schedule 7 para 2 — arrangements that prevent group relief being available; when outside-group funding counts under the restriction
- FA 2003 section 44 — contracts and substantial performance for SDLT
- an Act of 1967 we do not have an identifier for section 27 — historic stamp duty rules for group transfers (no link: an Act of 1967 we do not have an identifier for)
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 supplied legislation is current only to 17 November 2025. A transaction after that date needs a check against current primary legislation.
- The source does not set out the detailed facts needed to decide whether a particular funding or payment arrangement is outside the group.
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 signed contracts and any agreement changing who receives the land.
- A diagram showing every company in the group and its ownership percentages.
- Bank records and funding documents showing who provides and receives each payment.
- Documents showing any planned sale, refinancing or change of control.
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 Subsales and group relief: why a contract cannot simply avoid SDLT [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 Schedule 7 para 1 - group relief for land transfers within corporate groups https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/1/2025-11-17 - FA 2003 Schedule 7 para 2 - arrangements that prevent group relief being available https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/2/2025-11-17 - FA 2003 Schedule 7 para 2 - when outside-group funding counts under the restriction https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/2/2025-11-17 - FA 2003 section 44 - contracts and substantial performance for SDLT https://www.legislation.gov.uk/ukpga/2003/14/section/44/2025-11-17 - an Act of 1967 we do not have an identifier for section 27 - historic stamp duty rules for group transfers HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm23016 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. HMRC guidance is HMRC's 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 supplied legislation is current only to 17 November 2025. A transaction after that date needs a check against current primary legislation. - The source does not set out the detailed facts needed to decide whether a particular funding or payment arrangement is outside the group. 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 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Subsales and group relief: why a contract cannot simply avoid SDLT
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