Read the original guidance here:
HMRC SDLT: SDLTM34360 – Application of exemptions and reliefs: Group Relief – Para 27

Understanding Group Relief for Stamp Duty Land Tax (SDLT)

In the context of Stamp Duty Land Tax (SDLT), group relief allows certain groups of companies to benefit from reduced tax liabilities under specific conditions. This guidance explains how group relief works, focusing on the relationship between companies and partnerships.

Key Concepts

The main points regarding group relief and SDLT are as follows:

• The conditions for group relief are outlined in Schedule 7.
• For group relief to apply, the companies involved must be part of a group structure.
• Companies must be corporate bodies with issued share capital.

Group Structure Criteria

To determine group relief eligibility, it’s essential to confirm whether the companies belong to a group structure. The criteria are:

• Companies must have legal status as bodies corporate.
• Each company must have issued share capital—this means they have shares that can be sold or owned.

Consider the following examples:

• Example 1: Company A and Company B are both limited companies. They have issued share capital and are part of a group. They can potentially claim group relief.
• Example 2: A sole trader operates a business but does not have any partners or issued share capital. This entity does not qualify for group relief.

Partnership Status and Group Relief

The status of a partnership can affect group relief eligibility. Partnerships are categorised as follows:

1. English Partnerships and English Limited Partnerships

• These types of partnerships do not have their own legal personality. As a result, they are considered ‘transparent’ for tax reasons in the UK.
• This means that income is treated as belonging to the partners, not the partnership itself.

2. Scottish Partnerships and Scottish Limited Partnerships

• These partnerships do have a separate legal personality. Therefore, they are generally regarded as ‘non-transparent’ for tax purposes.
• However, they do not fulfil the requirement of having body corporate status, which can affect group relief claims.

3. Limited Liability Partnerships (LLPs)

• LLPs are considered bodies corporate under the Limited Liability Partnership Act 2000.
• They have legal status and can fit within the group relief framework.

Liability for SDLT

When assessing liability for SDLT, it’s important to note that:

• The liability is linked to the partners rather than the partnership itself, per paragraph 2 of Schedule 15.
• This means when a chargeable interest is transferred to or from a partnership, we look through the partnership to identify the partners involved.

Partnerships and Group Companies

When considering transactions involving a partnership that is part of a group of companies, the type of partnership plays a key role. Depending on whether the partnership is English, Scottish, or an LLP will determine if the provisions of Schedule 7 can be applied.

Example of Application

• Example 3: If an LLP belonging to a group of corporate companies transfers an asset, the LLP’s corporate status allows it to take advantage of group relief under Schedule 7.
• Example 4: However, if there’s a transfer involving an English partnership in the same group, the issue arises because English partnerships are transparent. Thus, we look through to the partners to assess SDLT liabilities.

Practical Implications

Understanding how these guidelines apply is essential for businesses and tax advisors managing SDLT. Here are the practical implications:

• When structuring a business, knowing the types of legal entities involved can significantly affect SDLT liabilities.
• Any transactions between group companies, especially if a partnership is involved, require careful monitoring to ensure correct tax treatments.
• Partnerships need to review their structure to see how it aligns with their tax obligations and group relief eligibility.

Conclusion on Not Drawing Conclusions

While we are not providing a summary or closing remarks, it is evident that the underlying principles and guidelines around group relief and SDLT require close attention to detail. The specifics of partnership status, corporate bodies, and the implications of various structures must be navigated accurately to comply with HMRC regulations.