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HMRC SDLT: SDLTM34380 – Application of exemptions and reliefs: Group Relief

Understanding Group Relief for Stamp Duty Land Tax (SDLT)

This article provides guidance on how to approach the application of exemptions and reliefs under the Stamp Duty Land Tax (SDLT) rules, specifically in cases involving group relief. We will take a step-by-step approach to explain how the transfer of a chargeable interest may occur within a group of companies, using the example of a partnership transfer involving B Ltd.

What is Group Relief?

Group relief allows companies within the same group to benefit from certain exemptions when transferring properties. This can help reduce the overall SDLT liability. A company can be part of a group if another company holds at least 75% of its share capital.

Key Concepts

• Chargeable Interest: This refers to an interest in land that is subject to SDLT.
• Market Value (MV): This is the price that a property would reasonably fetch on the open market.
• Corresponding Partner: A corresponding partner is an individual who was a partner in the partnership immediately before the transaction took place.
• Partnership Share: This refers to the percentage of ownership that a partner holds within a partnership.

Steps in the SDLT Process for Group Relief

Step One: Identify the Relevant Owners

The first step in the process is to identify the owners involved in the transaction. In our example:

• B Ltd is a relevant owner because it will hold a percentage of the chargeable interest right after the transaction. Prior to the transaction, B Ltd was also a partner in the partnership.

Step Two: Identify Corresponding Partners

For each relevant owner, the next step is to determine who the corresponding partners are:

• B Ltd serves as its own corresponding partner. It was a partner right before the transaction took place and is currently the relevant owner.
• C Ltd cannot be considered a corresponding partner as it is not an individual.

Step Three: Determine the Entitlement to Chargeable Interest

Now we need to establish the proportion of chargeable interest that B Ltd is entitled to after the transaction:

• B Ltd owns 100% of the chargeable interest immediately after the transfer.

Step Four: Calculate the Lower Proportion

This step involves finding out the lower proportion for each corresponding partner. In this situation:

• The proportion of the chargeable interest that attributes to B Ltd is 100%.
• The partnership share attributed to B Ltd is 50%.
• The lower proportion is determined to be 50% since it is the smaller number.

Step Five: Sum Up the Lower Proportions

In this case, we only have one lower proportion, which is 50. Thus:

• The total lower proportion is 50, as there are no additional proportions to sum up.

Calculating Chargeable Consideration

Next, we need to calculate the SDLT chargeable consideration, which is based on the market value (MV) and the lower share of the proportion. The formula is as follows:

Chargeable consideration = MV x (100 – SLP)%

Where SLP represents the lower proportion. In our case, it would be:

MV x 50% = 50%

This means there is a 50% charge on the market value, making it clear how much SDLT is applicable in this situation.

Application of Group Relief

Utilising the provisions from para 2(1), we look through the partnership to the individual partners involved:

• This transaction is treated as a transfer from B Ltd and C Ltd to B Ltd. Essentially, C Ltd transfers its 50% interest in the property to B Ltd.

Schedule 7 and Group Relationship

Since both B Ltd and C Ltd are wholly owned subsidiaries of A Ltd, Schedule 7 of the SDLT rules applies, provided that certain requirements from Schedule 7 and paragraph 2 are met. This will grant relief against the SDLT charge that has been identified under Schedule 15.

In summary, it is essential to accurately identify all relevant parties and proportions involved in a partnership transfer to properly apply for SDLT exemptions and reliefs. The process outlined above provides a structured approach to assess your SDLT liability while taking advantage of potential group relief.