Reconstruction Relief Withdrawal: SDLT Recovery from Group Companies and Controlling Directors

Who HMRC can pursue if withdrawn SDLT relief is not paid

If reconstruction relief or acquisition relief is later withdrawn, the acquiring company must pay the SDLT due. If it does not pay within six months after the tax became payable, HMRC may recover the unpaid amount from certain parent group companies or certain controlling directors, provided the statutory conditions are met and HMRC serves the required notice.

• The acquiring company is always primarily liable when SDLT becomes due after relief is withdrawn.
• HMRC can only look to others if the tax remains unpaid for six months after the payment date.
• Recovery may be sought from a company that was in the same group and above the acquiring company in the group structure during the relevant period.
• HMRC may also pursue a person who was a controlling director of the acquiring company, or of a company controlling it, at a relevant time.
• The relevant period runs from the effective date of the land transaction to the change of control that triggered the SDLT charge.
• A valid HMRC notice is required, and applying the rule can be technical where group ownership or control is complex.

Scroll down for the full analysis.

Who can be made to pay SDLT if reconstruction or acquisition relief is later withdrawn?

This page explains a recovery rule that applies after reconstruction relief or acquisition relief has been withdrawn for SDLT purposes. The basic position is that the acquiring company is liable for the tax that becomes due. But if that tax remains unpaid for six months after it became payable, HMRC may seek to recover the unpaid amount from certain other companies or individuals connected with the group.

What this rule is about

Reconstruction relief and acquisition relief can reduce or remove SDLT on certain company transactions. If the conditions for the relief later cease to be met, the relief can be withdrawn and SDLT becomes chargeable.

The source material deals with a narrow but important question: if the acquiring company does not pay that SDLT, who else can HMRC pursue?

This matters particularly in corporate groups and post-transaction restructurings. A company that received property may later be sold, become insolvent, or otherwise fail to pay. The legislation allows HMRC, in some circumstances, to recover the unpaid tax from other persons who were sufficiently connected with the acquiring company during the relevant period.

What the official source says

The official material states that once the SDLT due because reconstruction or acquisition relief has been withdrawn has been established, the primary liability rests with the acquiring company.

If all or part of that SDLT has not been paid within six months of the date it became payable, HMRC may recover the unpaid amount from other persons.

Those other persons are limited to two categories:

• a company which, at any relevant time, was in the same group as the acquiring company and was above it in the group structure; and
• any person who, at any relevant time, was a controlling director of the acquiring company or of a company that controlled the acquiring company.

For these purposes, the relevant time runs from the effective date of the land transaction to the date of the change of control that triggers the SDLT charge.

A company is above another in the group structure if the lower company, or another company above the lower company, is a 75% subsidiary of the higher company.

The source also says that HMRC must serve a notice on the person from whom it seeks recovery. It adds that the notice requirements are the same as for group relief recovery.

What this means in practice

The rule does not make every group company automatically liable. It creates a secondary recovery mechanism if the acquiring company does not pay within the six-month period.

In practical terms, there are three stages:

1. Relief is withdrawn, so SDLT becomes due.
2. The acquiring company remains the company primarily responsible for paying it.
3. If the tax is still unpaid six months after it became payable, HMRC may look beyond the acquiring company and recover the unpaid amount from qualifying group companies or qualifying directors.

This is significant where a group has inserted a special purpose vehicle as the acquiring company and that company later has little value or has left the group. The legislation is designed to stop the tax becoming irrecoverable simply because the immediate transferee cannot or does not pay.

For companies, the key question is whether they were above the acquiring company in the group structure during the relevant period. For individuals, the key question is whether they were a controlling director at a relevant time.

The source material does not say that HMRC must pursue the acquiring company to exhaustion before serving notices on others. It says only that the acquiring company is liable in the first instance and that recovery from others becomes possible if the tax remains unpaid for six months.

How to analyse it

If you are trying to work out whether this recovery rule could apply, the following questions are the sensible starting point:

1. Was reconstruction relief or acquisition relief originally claimed?

   This rule only matters if one of those reliefs applied and was later withdrawn.

2. Has the amount of SDLT due on withdrawal been determined?

   The source refers to the SDLT being determined, whether by passage of time, closure of an enquiry, or otherwise. That means the tax position must have crystallised.

3. Has the acquiring company failed to pay within six months of the date the tax became payable?

   Recovery from others only becomes possible once that six-month period has passed.

4. Which companies were above the acquiring company in the group structure during the relevant period?

   You need to trace the ownership chain between the effective date of the transaction and the change of control that triggered the charge. The legislation looks at whether the acquiring company, or a company above it, was a 75% subsidiary of the company in question.

5. Were there any controlling directors at a relevant time?

   The source adopts statutory definitions of “director” and “control”. This means the analysis may go beyond someone formally appointed as a director if the statutory rules treat them as falling within the definition.

6. Has HMRC served a valid notice?

   The source makes clear that a notice is required. Without that procedural step, recovery from the other person cannot simply be assumed.

Example

Illustration: Company A owns 100% of Company B, and Company B owns 100% of Company C. Company C acquires land and claims acquisition relief. Later, there is a change of control that causes the relief to be withdrawn, so SDLT becomes payable by Company C.

If Company C does not pay the SDLT within six months after it became payable, HMRC may be able to recover the unpaid amount from Company B or Company A, because each was above Company C in the group structure during the relevant period.

If, during that same period, an individual was a controlling director of Company C or of a company controlling Company C, HMRC may also be able to pursue that individual, provided the statutory conditions are met and the required notice is served.

Why this can be difficult in practice

The legal idea is straightforward, but applying it can be technical.

First, the relevant period is fixed by statute. It starts on the effective date of the transaction and ends on the date of the change of control that gives rise to the charge. In a complex restructuring, identifying that triggering date may itself require careful analysis.

Second, the phrase “above it in the group structure” depends on the 75% subsidiary test. In groups with layered holdings, intermediate companies, or changes in ownership over time, it may not be obvious which companies fall within the rule.

Third, the concept of a “controlling director” depends on statutory definitions of both “director” and “control”. Those definitions can extend beyond ordinary company-law labels. Someone may be within the rule even if their role was informal or their influence operated through another company, depending on how the control provisions apply.

Fourth, the source material is about recovery of unpaid tax, not about who caused the withdrawal of relief or who benefited commercially from the transaction. Those are different questions. A person may be within the recovery rule because of their position in the group or their control status, not because they were directly responsible for the later event.

Finally, the notice procedure matters. The source says the requirements are the same as for group relief recovery, which means the validity and timing of the notice may be important in any disputed case.

Key takeaways

• The acquiring company is primarily liable for SDLT due when reconstruction or acquisition relief is withdrawn.
• If that SDLT remains unpaid for six months after it became payable, HMRC may recover it from certain parent-group companies and certain controlling directors.
• Whether someone falls within the rule depends on the group structure, the relevant time period, the statutory control definitions, and service of a proper notice.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Reconstruction Relief Withdrawal: SDLT Recovery from Group Companies and Controlling Directors

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