Group Relief and Change of Control: SDLT Avoidance and HMRC Guidelines

When SDLT group relief can be blocked by change of control or outside consideration

SDLT group relief for land transfers within a company group can be refused if, when the transfer takes effect, there are arrangements for the buyer company to come under new control without the seller doing so, or if someone outside the group is effectively providing or receiving the consideration. HMRC looks at the whole plan, not just the intra-group transfer, but says ordinary commercial funding will not usually block relief unless it forms part of an SDLT-saving scheme.

• Relief may be denied if, at the effective date, there are arrangements for the purchaser to be acquired or controlled by someone outside the group while the vendor is not.
• HMRC says it will usually not challenge relief where the seller is the company leaving the group after first transferring the property to another group member, so the asset stays in the original group.
• Relief can also be blocked if consideration is provided or received, directly or indirectly, by a non-group person as part of wider arrangements.
• Ordinary commercial lending, including bank loans secured on the property, does not normally prevent relief by itself if there is no plan to move the property or its value outside the group without SDLT.
• HMRC may examine cases more closely where there are reorganisations, third-party guarantees, unusual security rights, outstanding intra-group debt, outside shareholders, dividends in specie, liquidation, or later sales or leases outside the group.
• The test is highly fact-sensitive, so timing, documents, funding terms, and any linked sale or restructuring steps all matter.

Scroll down for the full analysis.

When group relief can be blocked by arrangements for a change of control or outside consideration

This page explains an important restriction on SDLT group relief. The rule is aimed at stopping property being moved within a group tax-free as part of a wider plan for the property, or its value, to pass outside the group. The source material also explains when HMRC says it will not usually challenge relief, especially in ordinary commercial funding cases.

What this rule is about

Group relief can remove SDLT on certain land transfers between companies in the same group. But that relief is not available in every intra-group transfer. Schedule 7 to Finance Act 2003 contains anti-avoidance rules which can deny relief if, at the time of the transaction, there are arrangements for the purchaser to come under new control, or if the consideration is being provided or received by someone outside the group.

The issue is not just whether the transfer is intra-group on paper. The wider arrangements matter. HMRC is looking at whether the transfer is part of a plan to move the property, or an economic interest in it, out of the group without the SDLT charge that would normally arise.

What the official source says

The source deals with two parts of Schedule 7.

First, paragraph 2(1) can deny group relief if, at the effective date of the transaction, arrangements already exist for a person, or persons together, to obtain control of the purchaser but not the vendor. The timing matters. The arrangements must be in existence at the effective date.

The stated purpose of paragraph 2(1) is to prevent SDLT avoidance where a change of control is used to pass property, or an economic interest in it, out of the group.

However, HMRC says it will not argue that paragraph 2(1) denies relief where the company transferring the property is the one that is going to leave the group, after first transferring the land to other group members. The reasoning reflected in the parliamentary statement is that, in that situation, the asset may never leave the original group even though the transferor company does.

The source also says paragraph 2(1) does not apply where the arrangements are for a company to acquire shares under a reconstruction, provided certain conditions are met. In summary, those conditions include that section 75 FA 1986 applies to the acquisition and its relief conditions are satisfied, and that after the acquisition the purchaser is in the same group as the acquiring company.

Second, paragraph 2(2)(a) can deny relief where there are arrangements under which consideration is to be provided or received, directly or indirectly, by a person other than a group company.

HMRC says it will look at all the facts and will not interpret paragraph 2(2)(a) as denying relief unless the financing is part of a scheme to save SDLT when the property or an interest in it leaves the group.

The source gives examples where HMRC says paragraph 2(2)(a) is unlikely to block relief:

• the intra-group claim is not followed by a sale or underlease outside the group;
• the claim is followed by a sale or underlease outside the group, but SDLT will be paid by the outside purchaser on consideration close to market value, or the transaction is treated as the grant of a lease under the relevant legislation;
• commercial loan finance on ordinary commercial terms is used to facilitate the transfer, including a specific acquisition loan, a loan secured on the asset, or replacing or novating an existing charge.

The source also warns that these comments are limited to paragraph 2(2)(a). Satisfying HMRC on that point does not mean the claim automatically passes the other conditions in paragraphs 1 and 2 of Schedule 7.

Finally, the source lists situations HMRC may examine more closely in an enquiry. These include the creation or transfer of loan stock or equity capital, a capital reorganisation of the transferee, a third-party guarantee, a financing arrangement under which title may vest in the lender otherwise than simply on debt enforcement, or an assignment of the freehold reversion or intra-group lease outside the group. HMRC also flags concern where consideration remains outstanding or is represented by intra-group debt, or where there are outside shareholders in the transferee and the transaction is followed by a dividend in specie or liquidation.

What this means in practice

The main practical point is that an intra-group transfer can fail for SDLT group relief even if the transferor and transferee are in the same group when the transfer happens. You must also ask what wider arrangements already exist.

If there is a planned sale of the purchaser company, but not the vendor company, that is a danger area under paragraph 2(1). HMRC may say the transfer is part of a plan to move the property out of the group indirectly.

By contrast, if the vendor is the company that is due to leave the group, and it transfers the property to another group member before leaving, HMRC says it will not argue that paragraph 2(1) blocks relief. That is an important administrative position, but it should still be read carefully: it reflects HMRC’s approach to the legislation, not a rewriting of the legislation itself.

On funding, the source recognises that many genuine intra-group transfers are financed with bank debt or other commercial lending. Ordinary commercial loans do not normally, by themselves, mean that consideration is being provided by a non-group person in a way that blocks relief. HMRC is focused on whether the financing is part of an SDLT-saving scheme linked to the property leaving the group.

So the practical analysis is not simply “was there a loan from outside the group?” It is “what is the overall arrangement, and what is the loan doing in that arrangement?”

How to analyse it

A sensible way to analyse a claim is to work through these questions.

• At the effective date, were there any arrangements for someone to obtain control of the purchaser?
• If so, was there also a corresponding change involving the vendor, or is the purchaser alone being prepared for exit?
• Is the transferor instead the company that is expected to leave the group after moving the property elsewhere within the group?
• Are the arrangements part of a reconstruction to which the specific statutory conditions mentioned in the source may apply?
• Who is really providing the consideration, directly or indirectly?
• Is any outside funding simply ordinary commercial finance, or is it connected with a plan to move the property or its value outside the group?
• Will the transfer be followed by a sale, underlease, reorganisation, liquidation, dividend in specie, or other step affecting who ends up with the property or its value?
• Will SDLT be paid at a later stage by an outside purchaser on consideration close to market value?
• Does any part of the price remain outstanding, especially as intra-group debt that could reduce the value of the transferee on a later sale?

This is a fact-based exercise. The documents, board approvals, financing terms, sale process, and sequence of steps can all matter.

Example

Illustration: Company A and Company B are in the same group. Company A owns land and transfers it to Company B, claiming group relief. At the time of the transfer, there is already a plan for an outside buyer to acquire Company B, but not Company A. That raises a clear paragraph 2(1) issue, because the purchaser may be about to come under new control while the vendor does not.

By contrast, if Company A is the company that is being sold out of the group, and before that sale it transfers the land to Company B so the land stays within the original group, HMRC says it will not argue that paragraph 2(1) blocks relief on that basis.

A separate illustration on financing: Company A transfers land to Company B using a bank loan on ordinary commercial terms, secured on the land. If there is no wider scheme to move the property outside the group without SDLT, the source says paragraph 2(2)(a) will not normally deny relief just because of that commercial loan.

Why this can be difficult in practice

The word “arrangements” is broad. It can catch more than a signed sale contract. Heads of terms, a settled plan, linked funding steps, or a sequence of pre-planned transactions may all matter depending on the facts.

Another difficulty is that HMRC’s published approach mixes legislation, policy purpose, and administrative practice. For example, the statement that HMRC “will not argue” a point is helpful, but it is not the same as saying the legislation expressly contains that exception.

Paragraph 2(2)(a) is also fact-sensitive because outside finance is common in genuine commercial transactions. The difficult question is when funding remains ordinary commercial lending and when it becomes part of a structure designed to pass property or value outside the group without the intended SDLT charge.

The source also indicates that HMRC may look more closely where there are reorganisations, third-party guarantees, unusual security rights, outstanding intra-group debt, outside shareholders, dividends in specie, or liquidation. None of those features automatically defeats relief on the wording given here, but each may suggest that the transfer cannot be looked at in isolation.

Key takeaways

• Group relief can be denied if, at the effective date, there are arrangements for the purchaser to come under new control but not the vendor.
• HMRC says it will not argue that this rule blocks relief where the transferor is the company leaving the group after moving the land to another group member.
• Commercial loan finance does not normally defeat relief under paragraph 2(2)(a), unless it is part of a wider SDLT-saving scheme linked to the property leaving the group.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Group Relief and Change of Control: SDLT Avoidance and HMRC Guidelines

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