Understanding Subsales and Group Relief in Stamp Duty Land Tax Regulations

Subsales and Group Relief in SDLT

Under SDLT, one old stamp duty anti-avoidance rule was deliberately left out of the group relief legislation. HMRC’s view is that this is because SDLT works differently: if a land contract is substantially performed, section 44 of Finance Act 2003 can charge SDLT before completion, so the old stamp duty risk of “resting on contract” does not arise in the same way.

• Group relief can remove SDLT on certain transfers within a corporate group if the legal conditions are met.
• The omitted rule was section 27(3)(b) of Finance Act 1967, which had aimed to stop land being brought into a group from outside without stamp duty being paid.
• That rule was not reproduced in Schedule 7 to Finance Act 2003 because SDLT is not based in the same way on instruments as the old stamp duty system was.
• Section 44 Finance Act 2003 can impose SDLT where a contract is substantially performed, which reduces the need for the old anti-avoidance protection.
• When reviewing subsales or onward transfers, the key questions are what the SDLT land transactions are, whether substantial performance has happened, and whether group relief is available under the actual SDLT rules.
• You should not assume that every old stamp duty concept carries across into SDLT, even where the subject matter looks similar.

Scroll down for the full analysis.

Subsales and group relief in SDLT: why the old stamp duty rule does not carry across

This page explains a narrow but important point about group relief in Stamp Duty Land Tax. The official source says that one anti-avoidance rule found in the old stamp duty code was not reproduced for SDLT. The reason is that SDLT works differently. In particular, SDLT can be charged when a contract is substantially performed, so the old way of avoiding duty by “resting on contract” is not available in the same way.

What this rule is about

Group relief is intended to allow certain land transfers within a corporate group to take place without an SDLT charge, provided the statutory conditions are met.

The source material deals with subsales and with a specific comparison between:

• the old stamp duty rules in section 27(3) of Finance Act 1967, and
• the SDLT group relief rules in Schedule 7 to Finance Act 2003.

The key point is that one limb of the old stamp duty provision, section 27(3)(b), was designed to stop land being brought into a group from outside without stamp duty being paid. That limb was not included in the SDLT group relief rules.

The official explanation is that the old problem depended on the way stamp duty operated on instruments and contracts. SDLT is different, because SDLT has its own charge where a contract is substantially performed.

What the official source says

The source says that paragraph 2(2) of Schedule 7 contains SDLT rules based on section 27(3) of Finance Act 1967, but not all of that earlier provision was carried over.

In particular, section 27(3)(b) of the 1967 Act was omitted. According to HMRC’s manual, that omitted provision had been aimed at preventing land acquisitions from outside the group without stamp duty being paid.

HMRC then explains why the omission was deliberate. Under SDLT, it is not possible to avoid tax by “resting on contract”, because section 44 of Finance Act 2003 brings a transaction into charge where the contract is substantially performed.

What this means in practice

The practical message is that SDLT does not need this particular old stamp duty protection, because SDLT already taxes certain contract-based arrangements earlier and more directly.

Under the former stamp duty system, there could be scope for planning based on the fact that stamp duty generally applied to instruments, not simply to contracts. That created a risk that land could effectively move into a group without a stamped conveyance giving rise to duty in the expected way.

SDLT is structured differently. If a land contract is substantially performed, section 44 can trigger the tax charge even before completion. So the old concern addressed by section 27(3)(b) is, in HMRC’s view, not relevant in the SDLT code.

That does not mean subsale arrangements are ignored for SDLT. It means that this particular old stamp duty rule was not needed in the SDLT group relief legislation because SDLT has a different charging mechanism.

How to analyse it

If you are looking at a transaction involving a group company, an external seller, and possible onward transfers or subsale arrangements, a sensible approach is:

• Identify the actual land transaction or transactions for SDLT purposes.
• Check whether a contract has been substantially performed before completion.
• Consider whether group relief is being claimed on an intra-group transfer, and if so, under which provision in Schedule 7.
• Do not assume that an old stamp duty concept transfers directly into SDLT.
• Ask whether the concern is really about instruments, or whether SDLT has already dealt with it through the contract and substantial performance rules.

The important analytical point is that SDLT is not simply stamp duty under a new name. Where the old law contained protections aimed at weaknesses in an instrument-based tax, those protections may be unnecessary under SDLT if the SDLT charging provisions already address the same risk.

Example

Suppose a company outside a group agrees to sell land, and there is an onward arrangement involving a company within a group that hopes to rely on group relief for a later intra-group transfer.

Under the old stamp duty regime, there could be concern about whether land had effectively come into the group without the expected duty charge arising on an instrument. That is the type of problem section 27(3)(b) was intended to address.

Under SDLT, however, if the original contract is substantially performed, section 44 may already impose an SDLT charge at that stage. So the legislation does not need a direct equivalent of that old anti-avoidance rule in the group relief schedule.

This is only an illustration of the legislative logic. The actual SDLT outcome in any real case still depends on the precise transaction steps and the statutory provisions that apply to them.

Why this can be difficult in practice

The source material is brief and assumes familiarity with both the old stamp duty regime and SDLT. That can make the point look more technical than it really is.

The main difficulty is that readers may assume that if an anti-avoidance rule existed under stamp duty, there must be an SDLT equivalent. The source shows that this is not always true. Sometimes the rule was omitted because SDLT deals with the issue differently.

Another difficulty is that “substantial performance” is itself a technical concept under section 44. Whether it has occurred can be fact-sensitive. So while HMRC’s explanation is that SDLT removes the old “resting on contract” problem, applying that in a real transaction still requires careful attention to what has actually happened under the contract.

Key takeaways

• One old stamp duty anti-avoidance rule was not carried into the SDLT group relief code.
• HMRC’s reason is that SDLT already addresses the underlying concern through the substantial performance rule in section 44 Finance Act 2003.
• When analysing group relief and subsales, focus on the SDLT transaction structure and substantial performance, not on assumptions drawn from the old stamp duty regime.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Subsales and Group Relief in Stamp Duty Land Tax Regulations

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