When group relief is withdrawn: SDLT after a company grants a lease
Group relief and later leases
HMRC’s historic example shows that a company can face SDLT when it leaves a group within three years of receiving land with group relief.
- A lease can change the interest still held.
- The withdrawal may be proportionate.
- Historic legislation and rates need checking.
Scroll down for the full analysis.
Read the original guidance here:
When group relief is withdrawn: SDLT after a company grants a lease
When group relief is withdrawn: SDLT after a company grants a lease
Stamp duty group relief may appear settled when land passes between companies in the same group. That position can later change. SDLT may become payable if the company holding the land leaves the group within three years. A lease granted meanwhile can reduce the part of the original interest that remains relevant.
What this rule is about
When one group company transfers land to another, group relief can remove SDLT. The relief is not merely a benefit of using two company names. It requires the companies to be in the same qualifying group at the relevant time.
A further rule then applies. If, within three years, the company that received the land leaves that group after the transfer, the relief may be withdrawn and a tax bill can arise after the original transfer. Timing is critical.
This is the detail people often overlook: checking the group structure only on the transfer day is not enough. You must consider subsequent events as well.
What the official source says
HMRC’s manual includes a historic example. A Ltd owns all of B Ltd. On 25 June 2004, A Ltd transfers a freehold plot to B Ltd for nothing. The freehold is worth £1,000,000, and B Ltd claims group relief.
After receiving the plot, B Ltd grants a lease over it to an unconnected third party for its market value, and A Ltd subsequently sells B Ltd’s shares to another unconnected third party on 7 July 2006. B Ltd leaves A Ltd’s group before the three-year period ends on 24 June 2007.
- The original transfer was between companies in the same group.
- B Ltd claimed group relief for that transfer.
- B Ltd granted a lease after receiving the freehold.
- B Ltd then left the seller’s group within three years.
- HMRC says no exception applied in its example.
- The relief was therefore withdrawn.
HMRC says that B Ltd no longer holds the entire freehold it received. Instead, it holds the freehold reversion. Put simply, it owns the landlord’s interest after granting the lease.
The legislation allows a full or proportionate withdrawal. The proportion reflects the land interest originally transferred and the interest that the company, or linked group companies, still holds when the group exit occurs.
What this means in practice
Granting a later lease does not necessarily stop a group-relief clawback. It can, however, affect the amount of SDLT due when the relief is withdrawn. The answer does not depend solely on the land’s value when the shares are sold.
For this historic example, HMRC says the interest still held must be valued at the date of the original transfer, rather than at the later group-exit date. That is a vital detail.
- Keep the original transfer valuation.
- Keep the lease and any plan showing the land let.
- Check the date on which the company leaves the group.
- Compare that date with the end of the three-year period.
- Identify the interest still held at that later date.
- Check whether a statutory exception applies before calculating tax.
You may assume that granting a lease means the company has sold the land. That is not necessarily so. It may still hold a valuable landlord’s interest.
How to analyse it
Begin with the original land transfer and work forward from there. Every date and document matters. The label given to a deal will not determine the result.
- Was group relief available when the land moved between the companies?
- What was the effective date of that transfer?
- Did the receiving company leave the seller’s group within three years?
- Were arrangements for that exit already in place within that period?
- What interest in the land did the receiving company still hold at the group exit?
- Was that interest derived from the original freehold?
- Does an exception prevent relief being withdrawn?
- What historic SDLT rates applied to the original transfer date?
Calculate the amount only once those questions have been answered. The calculation starts with the tax that would have applied without relief, then uses the relevant proportion where the facts support one.
Example
HMRC’s illustration is as follows. On 25 June 2004, A Ltd transfers a £1,000,000 freehold to its wholly owned company, B Ltd. B Ltd later grants a lease. When B Ltd leaves the group on 7 July 2006, after granting that lease and before the three-year period has ended, it holds the freehold reversion together with the right to rent. That is the interest considered.
HMRC values that interest at £900,000 on 7 July 2006. However, for the historic calculation in the manual, its value on 25 June 2004 is £850,000. The relevant proportion is therefore £850,000 divided by £1,000,000: 85%.
HMRC’s example therefore applies the SDLT calculation to 85% of the original £1,000,000 market value. As the manual does not state the historic rate, this page does not calculate the final tax figure.
Why this can be difficult in practice
The dates may be straightforward. The interest held often is not. A lease may cover all or only part of the land, and its terms may affect what remains with the landlord.
Valuation is also central. In its worked example, HMRC uses the historic value of the reversionary interest at the original transfer date, rather than merely the value of that interest when the group changes. That distinction matters.
- A share sale may cause a company to leave the group.
- A planned exit can matter even if it happens later.
- A lease of part of the land may need a more detailed split.
- The value of the reversion may differ from the land’s full freehold value.
- An exception may change the outcome completely.
- Historic statutory wording may differ from the current consolidated text.
HMRC’s manual sets out its view of this old example. It does not replace the legislation in force at the time. That distinction matters where the calculation is disputed.
Key takeaways
- Group relief can be withdrawn after a company leaves the group within three years.
- A lease may leave the company with a landlord’s interest, rather than the full freehold.
- For HMRC’s historic example, the proportion uses values at the original transfer date.
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 section 62 — provides for group relief claims in returns
- FA 2003 Schedule 7 para 1 — sets the basic conditions for group relief
- FA 2003 Schedule 7 para 3 — withdraws group relief after a group exit
- FA 2003 Schedule 7 para 4 — sets out cases where relief is retained
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 HMRC example applies a historic method of valuing the interest still held by reference to the transfer date.
- The bundled consolidated legislation records later amendments, so the exact statutory wording in force in 2004 needs checking before relying on this example in a live case.
- Whether an interest is derived from the original land interest can depend on the documents and facts.
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 group ownership chart at the date of the land transfer and the date of the share sale
- The transfer document and its effective date
- The lease document, including what land it covers and when it was granted
- Evidence of the market value of the original freehold on 25 June 2004
- Evidence supporting the value of the freehold reversion at that date
- Details of any exception that may stop relief being withdrawn
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 When group relief is withdrawn: SDLT after a company grants a lease [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 section 62 - provides for group relief claims in returns https://www.legislation.gov.uk/ukpga/2003/14/section/62/2025-11-17 - FA 2003 Schedule 7 para 1 - sets the basic conditions for group relief https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/1/2025-11-17 - FA 2003 Schedule 7 para 3 - withdraws group relief after a group exit https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/3/2025-11-17 - FA 2003 Schedule 7 para 4 - sets out cases where relief is retained https://www.legislation.gov.uk/ukpga/2003/14/schedule/7/paragraph/4/2025-11-17 HMRC's guidance page on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm23090e 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 HMRC example applies a historic method of valuing the interest still held by reference to the transfer date. - The bundled consolidated legislation records later amendments, so the exact statutory wording in force in 2004 needs checking before relying on this example in a live case. - Whether an interest is derived from the original land interest can depend on the documents and facts. 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: When group relief is withdrawn: SDLT after a company grants a lease
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