Guide on Group Relief for Transfer of Chargeable Interest to B Ltd

Group relief on land transferred from a partnership to a group company

When land is moved from a partnership to a company that is already a partner, SDLT is first worked out under the special partnership rules rather than under the normal sale rules. Those rules may mean tax is charged on only part of the market value. After that calculation, group relief may reduce or remove the charge if the part being acquired is treated, in substance, as coming from another company in the same group and the legal conditions are met.

• For transfers from a partnership, you must apply the partnership SDLT rules first and not start with an ordinary transfer analysis.
• The charge is based on a statutory market value formula, including identifying the relevant owner, the corresponding partner, and the lower proportion.
• In the example, B Ltd already had an indirect 50% interest through the partnership, so SDLT was charged on only 50% of market value.
• The remaining 50% was treated in substance as moving from C Ltd to B Ltd, which meant group relief could potentially apply.
• Group relief does not replace the partnership calculation; it is considered only after the SDLT charge has been worked out.
• Relief is not automatic: the detailed Schedule 7 group relief conditions must still be checked carefully.

Scroll down for the full analysis.

Group relief where land is transferred from a partnership to a group company

This page explains how group relief can apply when land is transferred out of a partnership to a company in the same corporate group. The source material deals with a technical SDLT calculation under the partnership rules and then shows how group relief may reduce or eliminate the charge. The key point is that you do not start with ordinary sale-and-purchase analysis. You first work out the SDLT charge under the partnership rules, and only then consider whether group relief is available for the part treated as moving within the group.

What this rule is about

SDLT has special rules for land held by partnerships. When land is transferred from a partnership to one of its partners, the tax result is not worked out in the same way as an ordinary transfer between two separate persons.

Instead, the legislation looks through the partnership and asks, in substance, whose economic interest in the land has moved. That matters because a partner may already have had an indirect interest in the property through the partnership before the transfer.

The source material then considers group relief. Group relief is a separate relief that can apply where land is transferred between companies in the same group, provided the statutory conditions are met. In a partnership case, the practical question is whether the transfer can, to the relevant extent, be treated as a movement of land from one group company to another group company.

What the official source says

The official material considers a transfer of a chargeable interest from a partnership to B Ltd. Because the transfer is from a partnership, the partnership provisions apply. The SDLT charge is worked out using the market value formula in the partnership rules, by identifying the relevant owner, the corresponding partner, and the lower proportion.

On the facts given:

• B Ltd is the relevant owner because it was a partner before the transfer and owns the whole property after it.
• B Ltd is also its own corresponding partner.
• B Ltd owns 100% of the property after the transfer.
• The two figures compared at the lower proportion stage are 100% and 50%.
• The lower proportion is therefore 50%.
• The chargeable consideration is market value multiplied by 50%.

The manual then explains the result in practical terms: looking through the partnership, the transfer is effectively treated as a transfer of the other 50% interest to B Ltd. In the example, that other 50% is treated as coming from C Ltd.

Because B Ltd and C Ltd are both 100% subsidiaries of A Ltd, the manual says Schedule 7 group relief can apply, if the conditions for that relief are met. On those facts, the relief would apply to the charge identified under the partnership rules.

What this means in practice

The important practical point is that a transfer from a partnership to a company partner is not automatically taxed on the full market value. The partnership rules may reduce the charge to reflect the transferee’s existing partnership interest.

In the example, B Ltd already had a 50% partnership share. So the SDLT charge is calculated only by reference to the remaining 50% of the market value. Economically, B Ltd is treated as already owning its own share indirectly, and as only acquiring the other partner’s share on the transfer out.

That is where group relief becomes relevant. If the remaining share is, in substance, moving from another group company to the transferee company, group relief may relieve that charge. The manual’s example treats the transfer as if C Ltd’s 50% interest is moving to B Ltd. Since both companies are in the same group, group relief may cover that part.

This does not mean group relief replaces the partnership calculation. The order matters:

• first calculate the SDLT charge under the partnership rules;
• then ask whether a relief, such as group relief, applies to that charge.

How to analyse it

A sensible way to approach this type of case is as follows.

1. Confirm that the transaction is a transfer of a chargeable interest from a partnership. If it is, the partnership provisions are engaged.
2. Work through the partnership calculation. Identify the relevant owner, any corresponding partners, and the lower proportion.
3. Calculate the chargeable consideration using the statutory market value formula required by the partnership rules.
4. Ask what the transaction represents in substance when you look through the partnership. Whose economic share is the transferee really acquiring?
5. Consider whether that underlying movement is between companies in the same group.
6. If so, test the conditions for group relief under Schedule 7. The manual makes clear that relief only applies if those conditions are met.

In other words, the partnership rules tell you how much of the market value is potentially charged. Group relief may then remove that charge if the part being acquired is treated as coming from a fellow group company.

Example

Illustration based on the source material:

A partnership owns land. The partners are B Ltd and C Ltd. Each has a 50% partnership share. The land is transferred from the partnership to B Ltd, so that B Ltd owns the whole property outright after the transfer.

Under the partnership rules, B Ltd is already treated as having had an indirect 50% interest before the transfer. So the SDLT charge is based on only 50% of the market value, not 100%.

If B Ltd and C Ltd are both 100% subsidiaries of A Ltd, the transaction is then viewed, in substance, as B Ltd acquiring C Ltd’s 50% interest. If the group relief conditions are satisfied, that 50% charge may be relieved.

Why this can be difficult in practice

The manual example is short, but real cases can be more complicated.

First, the partnership calculation is technical. The result depends on correctly identifying the relevant owner, the corresponding partner or partners, and the lower proportion. A mistake at that stage changes the amount of market value brought into charge.

Second, the look-through analysis can be difficult where there are several partners, changing partnership shares, or different classes of partner. The source example is simple because there is one transferee company and one other company partner with a clear 50:50 split.

Third, the manual says that C Ltd cannot be a corresponding partner because it is not an individual. That point arises from the specific statutory mechanism being applied in this example. In practice, partnership SDLT rules often require close attention to defined terms and to exactly which step of the calculation is being performed. It is important not to generalise beyond the statutory wording.

Fourth, group relief is not automatic. The source expressly says it applies only if the requirements of the relevant paragraph in Schedule 7 are met. So even if companies appear to be in the same group, the detailed statutory conditions still need to be checked.

Finally, this is an example from HMRC’s manual. A manual explains HMRC’s view and how it applies the legislation, but the legal effect ultimately comes from the legislation itself.

Key takeaways

• Where land is transferred from a partnership to a partner, SDLT is worked out under the special partnership rules, not as an ordinary transfer.
• The charge may be based on only part of the market value if the transferee already had an indirect partnership interest in the land.
• After calculating that charge, group relief may apply if the part being acquired is, in substance, moving between companies in the same group and the statutory conditions are satisfied.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Group Relief for Transfer of Chargeable Interest to B Ltd

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