SDLT group relief: the clawback rule after internal land transfers
When SDLT group relief can be clawed back
Paragraph 4A can apply where land has moved between group companies before a company changes hands. It prevents internal steps from breaking the link with an earlier relieved transfer.
- Check all relieved transfers in the three years before the control change.
- Follow the land right through every company.
- Review agreements to sell shares as well as completed sales.
Scroll down for the full analysis.
Read the original guidance here:
SDLT group relief: the clawback rule after internal land transfers
SDLT group relief: the clawback rule after internal land transfers
A company can lose stamp duty group relief after land is moved within its group and that company is later sold. A clawback can arise even where the company that originally received the land is not the one sold, because later internal transfers may have removed the direct connection. That connection may have gone. The issue is technical. The tax cost can be large.
What this rule is about
Group relief can remove SDLT when land passes between companies in the same group, although the relief may later be withdrawn if the buying company leaves within three years. It is not always permanent.
Under the main rule, the question is whether the buying company, or a linked company, continues to hold the land when that company leaves the group. Internal transfers can sever that direct link. Paragraph 4A addresses that gap.
This arrangement is sometimes described as a drop-and-bounce arrangement. Land moves down through one company and then back up through another part of the group before shares in a company are sold. That is the pattern.
What the official source says
HMRC’s manual says that Finance Act 2003 Schedule 7 paragraph 4A applies to certain chains of internal transfers.
It can restore the normal group-relief clawback rules where paragraph 3 would otherwise not apply because of the sequence of events.
- There must be a change of control of the company that made the later purchase.
- The control change must happen within three years of that transfer’s effective date.
- It can also count if it happens under arrangements made within those three years.
- The ordinary clawback rule in paragraph 3 must not already withdraw the relief.
- There must be an earlier relieved transfer within the three years before the control change.
- For the rule to apply, the later land right must be the same as, part of, or derived from the earlier one, so that the two transfers remain legally linked. That link is required.
- Since the earlier transfer, nobody can have received that land right under an unrelieved transfer.
Once those conditions are met, the withdrawal rules operate as if the seller in the earliest relevant transfer had sold to the buyer in the latest transfer.
This connects the first transfer with the later share sale.
What this means in practice
You cannot assume that moving land between group companies removes the risk before a share sale. The land may no longer be held by the first company. That fact alone may not stop a clawback.
The chain is especially important. It shows who held the land, which transfers claimed relief, and who changed hands. Descriptions such as “reorganisation” do not determine the result.
- Check planned share sales alongside any recent internal land transfers.
- Count three years from the effective date of each relevant transfer.
- Check agreements as well as completed sales of shares.
- Trace the land right through every company in the chain.
- Keep the group chart for each stage, not only the final chart.
How to analyse it
Begin with the latest transfer that used group relief. Then trace the position backwards. A careful timeline will often make the issue clearer.
- Identify every transfer of the land right or a right derived from it.
- Record the effective date and relief claimed for each transfer.
- Find the earliest earlier transfer that meets paragraph 4A.
- Ask whether the later buying company changed control.
- Check when that change happened and when it was agreed.
- Test whether paragraph 3 already produces a clawback.
- If it does not, test the extra conditions in paragraph 4A.
- Work out the tax that would arise if relief is withdrawn.
Do not overlook the intervening transfers. They often explain why this rule matters.
Example
Company A owns Company B, and B owns Company C. A transfers land worth £2 million to C and claims group relief. Later, C transfers the same land back to B, again within the group.
Within three years of A’s transfer to C, C transfers the same land back to B within the group; A then sells its shares in B to an outside buyer. The sale follows.
B and C leave A’s group together. The usual rule may not catch the first transfer because C originally received the land, but C is not the company whose shares A sells.
Paragraph 4A can instead connect the first transfer with the later position.
The clawback rules may then apply as if A had transferred the land to B. The example does not calculate SDLT because the source gives no rate or tax figure.
Why this can be difficult in practice
Dates are only part of the problem. Groups may include several companies, partial transfers, leases, or changes in share rights. A simple diagram can conceal a complicated legal history.
You may think that only the last company holding the land matters. The result can turn on the earlier relieved transfer and on the route the land took afterwards, even where only the last holder initially appears relevant. That history matters.
- A transfer of part of a site may still be linked to an earlier transfer.
- A new lease or altered property right may be derived from an earlier land right.
- Where an agreement is made before the three-year point and the share sale completes only later, that earlier agreement can still matter to the analysis.
- Control can change without one person buying every share.
- HMRC’s manual is guidance, not the law; the statutory wording remains the starting point.
Key takeaways
- Internal transfers do not necessarily prevent a group-relief clawback.
- A share sale within three years can trigger a detailed review.
- Trace every transfer of the land right before reaching a conclusion.
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 — when an intra-group land transfer is exempt
- FA 2003 Schedule 7 para 3 — when group relief is withdrawn after group exit
- FA 2003 Schedule 7 para 4A — clawback rules for successive relieved land transfers
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
- Whether two land rights are the same, form part of one another, or are derived from one another can depend on the documents and transaction history.
- Whether a sale or other event changes control depends on the ownership and control facts, not simply on the names used for the steps.
- The result can depend on whether an intervening transfer was relieved and whether it was at market value.
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.
- A group chart before and after every step.
- Transfer documents and SDLT returns for each internal transfer.
- Dates of each transfer and of any agreement to sell shares.
- Share sale documents and details of who controlled each company.
- Evidence showing how the land right changed, if it was split or altered.
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 SDLT group relief: the clawback rule after internal land transfers [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 - when an intra-group land transfer is exempt https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/1/2025-11-17 - FA 2003 Schedule 7 para 3 - when group relief is withdrawn after group exit https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/3/2025-11-17 - FA 2003 Schedule 7 para 4A - clawback rules for successive relieved land transfers https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/4A/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm23071 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its 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 - Whether two land rights are the same, form part of one another, or are derived from one another can depend on the documents and transaction history. - Whether a sale or other event changes control depends on the ownership and control facts, not simply on the names used for the steps. - The result can depend on whether an intervening transfer was relieved and whether it was at market value. 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: SDLT group relief: the clawback rule after internal land transfers
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