HMRC SDLT: SDLTM23030A – Group, reconstruction or acquisition relief

Group, Reconstruction or Acquisition Relief

This section of the HMRC internal manual provides guidance on the principles and concepts related to group, reconstruction, or acquisition relief. It is intended for internal use by HMRC staff.

• Explains the conditions under which relief can be claimed.
• Details the procedural requirements for obtaining relief.
• Outlines the tax implications for groups undergoing reconstruction or acquisition.
• Provides examples to illustrate the application of relief.

Group, Reconstruction, or Acquisition Relief – SDLTM23030A

This guidance explains the concept of group relief in the context of Stamp Duty Land Tax (SDLT). Group relief allows certain companies in a group to benefit from relief from SDLT when transferring property or land. However, specific conditions must be met for the relief to apply. Below are key ideas and principles to understand how group relief works, along with a relevant example.

What is Group Relief?

Group relief is a form of relief from Stamp Duty Land Tax that may apply when a property is transferred between companies that are part of the same group. A group typically consists of a parent company and its wholly-owned subsidiaries. To qualify for group relief, companies must meet the following criteria:

• The purchaser must be a 100% subsidiary of the vendor at the time of the transaction.
• All companies involved must satisfy various other tests laid out in the specific SDLT regulations.

When is Group Relief Not Available?

There are certain situations when group relief cannot be used, even if the companies involved generally meet the group criteria. One key example of this is when arrangements are made that change control of the purchaser company.

Example of Non-Availability of Group Relief

Consider the following scenario to illustrate when group relief is not available:

A Ltd (the vendor) owns a piece of property and decides to sell it to B Ltd (the purchaser). At the time of this transaction, both companies meet the requirements for group relief since B Ltd is a 100% subsidiary of A Ltd, and all other necessary tests are fulfilled.

However, at the same time as the sale, A Ltd makes an arrangement to sell its shares in B Ltd to a third party, C Ltd, who is not connected to A Ltd or B Ltd in any way.

In this case, group relief is not available to B Ltd because the arrangement allows C Ltd to gain control over B Ltd while A Ltd remains unchanged as the vendor. When C Ltd takes over control of B Ltd but does not gain control over A Ltd, it creates a situation where group relief can no longer apply.

Implications of Not Using Group Relief

Since B Ltd does not qualify for group relief in this example, it will have to:

• Pay Stamp Duty Land Tax on the purchase of the property from A Ltd.
• Complete and submit a land transaction return to HMRC, even though it hoped to benefit from the group relief.

Understanding the Control Aspect

Control is a significant factor in determining whether group relief applies. Here’s what you should understand about control in these transactions:

• Control generally refers to the ability to influence the decisions and operations of a company. This usually means owning a significant portion of shares.
• In a situation where control is transferred to an unconnected third party, relief may no longer be applicable, as the vendor and purchaser arrangements have changed.

Key Takeaways

When dealing with transactions involving companies within a group, it is essential to be aware of the specific conditions that can affect group relief:

• The relationship between the vendor and purchaser must remain intact with no significant changes in control during the transaction.
• If control is set to change post-transaction, as in the provided example, companies will not qualify for group relief and must fulfill the standard tax obligations.
• Understanding these conditions helps companies make informed decisions when planning property transactions and optimising tax liabilities.

For more detailed information or specific queries regarding your situation, you may visit the Stamp Duty Land Tax guidance page to see how group relief may or may not apply to your circumstances.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM23030A – Group, reconstruction or acquisition relief

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