Group Relief Withdrawal: B Ltd Leaves Group, Stamp Duty Land Tax Reassessed

SDLT Group Relief Clawback When the Buyer Leaves the Group After Changing the Property Interest

If a company gets SDLT group relief on a land transfer and then leaves the group within three years, the relief may be withdrawn. Where the company has changed the property interest before leaving the group, the clawback is not always based on the full original interest. Instead, it may be worked out by comparing the value of the original interest with the value of the altered interest still held, with both values measured at the date of the original transfer.

• Group relief can be withdrawn if the buyer leaves the seller’s group within three years and no statutory exception applies.
• If the buyer has granted a lease, sold part, or otherwise changed the interest, the SDLT clawback may apply only to a proportion of the original relieved transaction.
• The key comparison is between the original chargeable interest transferred and the chargeable interest still held when the buyer leaves the group.
• The altered interest must be valued as at the date of the original transfer, not at the later date of degrouping.
• HMRC’s example uses a freehold originally worth £1,000,000, with the altered interest valued at £850,000 at the original date, so the clawback is reduced proportionately.
• In practice, historic valuation evidence and careful tracking of leases or other dealings during the three-year period may be needed.

Scroll down for the full analysis.

SDLT group relief: what happens if the buyer leaves the group after the property interest has changed

This page explains a specific SDLT clawback problem. It deals with a company that received land from another group company with group relief, but then leaves the group within three years after changing the interest it holds in the property. The key point is that the tax is not always recalculated by looking at the exact interest originally transferred. Instead, you may need to compare the value of the original interest with the value of the different interest still held when the company leaves the group.

What this rule is about

Group relief can remove SDLT from a land transfer between companies in the same group. But that relief is not unconditional. If the purchaser leaves the group within three years of the transfer, the relief can be withdrawn unless a statutory exception applies.

This source deals with a further complication. Between the original transfer and the date the purchaser leaves the group, the purchaser may have altered what it owns. For example, it may have granted a lease out of the freehold. In that case, the purchaser no longer holds exactly the same chargeable interest that it originally acquired.

The question then becomes: how much SDLT is clawed back when the original interest has been carved up or changed before the purchaser leaves the group?

What the official source says

The HMRC manual gives an example:

• A parent company, A Ltd, owns B Ltd entirely, so they are in the same SDLT group.
• A Ltd transfers a freehold to B Ltd for no consideration.
• The freehold is worth £1,000,000 at the date of that transfer.
• B Ltd claims group relief.
• Later, B Ltd grants a lease to an unconnected third party for market value.
• Before three years have passed from the original transfer, A Ltd sells the shares in B Ltd to an unconnected third party, so B Ltd leaves the group.

HMRC says group relief is then withdrawn because the purchaser left the group within three years and no exception applies.

By the time B Ltd leaves the group, it no longer holds the original freehold interest in the same form. It now holds the freehold reversion and the right to receive rent under the lease. HMRC’s approach is that the SDLT clawback is based on the appropriate proportion of the original transaction, comparing:

• the chargeable interest transferred by the original transaction, and
• the chargeable interest now held when the purchaser leaves the group.

Crucially, the market value of the interest now held must be worked out as at the date of the original transaction, not at the later date when the purchaser leaves the group.

In HMRC’s example:

• the original freehold was worth £1,000,000 at the original transfer date;
• the interest still held later is valued, as at that same original date, at £850,000.

The SDLT clawback is therefore calculated by reference to the original market value, reduced proportionately by 850,000/1,000,000.

What this means in practice

If group relief is withdrawn, you do not automatically look at the value of the property at the date the company leaves the group. Nor do you simply charge SDLT on whatever the property is worth at that later date.

Instead, the calculation starts with the original relieved transaction. You then ask how much of that original chargeable interest is still represented by what the purchaser holds when it leaves the group.

If the purchaser has granted a lease out of a freehold, sold off part, or otherwise changed the legal interest, the clawback may apply only to an appropriate proportion of the original transaction.

The valuation exercise is unusual because it requires the later interest to be valued at the earlier date of the original transfer. That can materially affect the amount of SDLT brought back into charge.

In practical terms, this means:

• the original transfer date remains central to the calculation;
• changes to the property interest before degrouping matter;
• historic valuation evidence may be needed, not just current figures;
• conveyancers and tax teams should track any leases or other dealings during the three-year period.

How to analyse it

A sensible way to analyse this type of case is:

1. Identify the relevant transaction for which group relief was claimed.
2. Check whether the purchaser ceased to be in the same group as the vendor within three years of that transaction.
3. Consider whether any statutory exception prevents withdrawal of relief. The source example assumes none applies.
4. Identify the chargeable interest transferred by the original transaction.
5. Identify what chargeable interest the purchaser actually holds when it leaves the group.
6. If that interest has changed, work out the market value of the interest now held, but value it as at the date of the original transaction.
7. Compare that figure with the market value of the original interest at the original transaction date.
8. Apply the resulting proportion to determine how much SDLT becomes payable on withdrawal of relief.

The important analytical point is that this is not just a degrouping question. It is also a chargeable-interest comparison question.

Example

Illustration based on the HMRC example:

A Ltd transfers a freehold worth £1,000,000 to B Ltd and B Ltd claims group relief. A few months later, B Ltd grants a lease to an unconnected tenant. Before three years from the transfer have expired, B Ltd is sold outside the group.

At that point, B Ltd no longer holds the unencumbered freehold. It holds the reversion and the right to receive rent. Suppose that altered interest would have been worth £850,000 if valued on the date of the original transfer.

On HMRC’s approach, the clawback is not based on 100% of the original £1,000,000 value. It is based on the appropriate proportion represented by £850,000 out of £1,000,000. So the SDLT brought back into charge is the SDLT that would have been payable on the original transaction, reduced to reflect that proportion.

Why this can be difficult in practice

The main difficulty is valuation. The interest held when the purchaser leaves the group may be quite different from the interest originally acquired. Valuing that altered interest as at the earlier transfer date may require specialist evidence, especially if a lease, easement, part disposal, or other property dealing has changed the nature of what is held.

Another difficulty is identifying exactly what counts as the interest now held for this purpose. In straightforward lease-grant cases the position may be easier to describe, but more complex land arrangements can make the comparison less obvious.

The source also assumes that no exception to withdrawal applies. In real cases, whether an exception applies can itself be a separate legal question.

Finally, readers should be careful not to confuse:

• the market value of the altered interest at the date the company leaves the group, and
• the value of that altered interest as at the date of the original relieved transfer.

The HMRC example makes clear that the second of those is the relevant one for this calculation.

Key takeaways

• If the purchaser leaves the vendor’s group within three years, group relief may be withdrawn.
• Where the purchaser no longer holds exactly the same property interest, the clawback may be based on a proportion of the original transaction.
• The altered interest is valued at the date of the original transfer, not the later degrouping date.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Group Relief Withdrawal: B Ltd Leaves Group, Stamp Duty Land Tax Reassessed

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