Do you pay SDLT when a parent gifts a rental property to a limited company?

Introduction

This question often comes up when a family wants to move a buy-to-let property into a company as part of estate planning or long-term tax planning. A common assumption is that, if no money changes hands and there is no mortgage, there is no Stamp Duty Land Tax (SDLT). That assumption can be wrong where the transferee is a company.

The position also needs to be separated carefully from Capital Gains Tax (CGT) and Inheritance Tax (IHT). A transfer can trigger SDLT even where it is intended as a gift, and even where there is little or no gain for CGT purposes.

The Question

A father owned a buy-to-let property in his sole name. He had bought it outright some years earlier with no mortgage. The property was then transferred to a newly incorporated limited company owned by a family member. The family had been told that, because there was no consideration, no SDLT was payable.

They also wanted to know whether:

• the transfer would simply fall within the seven-year IHT rule for gifts;
• a separate gift deed was needed; and
• there would be no CGT because the property had only increased slightly in value.

Nick’s Explanation

Nick’s key point was that the SDLT analysis changes when the property is transferred to a company. In anonymised form, his explanation was:

“If a property is transferred from one individual to another individual and there is no consideration, there would generally be no stamp duty to pay. However, where the property is transferred to a limited company, the Finance Act 2003 can require SDLT to be charged on the market value of the property instead.”

He also explained that, because the property is residential and the buyer is a company, the higher residential rates apply. On a market value of £285,000, that produces an SDLT charge of £17,500.

That is the central correction to the original assumption: no cash consideration does not necessarily mean no SDLT when a company acquires the property.

The Law

The relevant SDLT rules are found in Finance Act 2003.

As a starting point, SDLT is normally charged by reference to “chargeable consideration”. If land is given away and there is truly no consideration, there may be no SDLT charge under the ordinary rule.

However, there is an important market value rule for transfers involving companies. Under Finance Act 2003, section 53, where a person transfers land to a company and is “connected” with that company, the transaction is treated for SDLT purposes as taking place for consideration equal to the market value of the subject matter of the transaction.

Connected persons are defined by tax legislation and the concept is broad. It commonly catches transfers involving close family and companies controlled within the family structure.

For residential property acquired by a company, the higher rates for additional dwellings are generally in point. In practical terms, a corporate purchaser of a dwelling usually pays SDLT at the residential rates plus the higher rates surcharge.

On the CGT side, a gift is not ignored. A disposal by way of gift is generally treated as taking place at market value for CGT purposes. So the transferor may still have a chargeable disposal even though no money is received.

On the IHT side, a lifetime gift can be a potentially exempt transfer if made to an individual, but a transfer into a company structure does not automatically mean the analysis is straightforward. It is necessary to identify exactly what has been given, to whom, and whether any reservation of benefit or other anti-avoidance issue arises.

Analysis

The SDLT point is the clearest part of the analysis.

Step 1: identify the buyer. The buyer here is not an individual family member. It is a limited company.

Step 2: ask whether the market value rule applies. Where land is transferred to a connected company, section 53 Finance Act 2003 can deem the consideration to be the market value, even if the transfer is intended as a gift.

Step 3: apply SDLT rates to that market value. If the property is a dwelling and the buyer is a company, the higher residential rates usually apply.

Using the market value stated in the scenario, £285,000, the SDLT calculation at the residential rates plus the higher rates surcharge is:

• 0% on the first £125,000 = £0
• 7% on the next £125,000 = £8,750
• 10% on the remaining £35,000 = £3,500
• plus the effect of the higher rates across the bands, giving a total of £17,500

So the broad conclusion reached by Nick is that SDLT is likely to be payable despite there being no cash consideration and no mortgage.

On CGT, the statement that there is “no CGT” simply because the valuation is only slightly above the original purchase price is too absolute. A gift is normally treated as a disposal at market value. That means the father would usually be treated as disposing of the property for its market value at the date of transfer, not for nil.

Whether any CGT is actually payable depends on the figures after allowable costs, enhancement expenditure, and any available reliefs or annual exempt amount for the relevant year. If the gain is small, the tax may be modest or possibly nil, but that is a separate calculation. The important point is that the market value rule generally applies.

On IHT, the idea of a “seven-year rule” is only a shorthand. It is not enough on its own to conclude that there is no IHT issue. The tax treatment depends on the legal nature of the transfer and whether the donor continues to benefit from the transferred assets or from arrangements linked to them. If the arrangement is intended as estate planning, the structure needs to be reviewed carefully rather than assuming the gift simply drops out of account after seven years.

As for a gift deed, that is more a matter of documenting the legal and tax position properly than creating the tax treatment by itself. If a transfer is intended as a gift, the transaction documents should accurately reflect that. But having a gift deed does not remove SDLT where the market value rule applies to a company acquisition.

Outcome

The practical conclusion is that the “no consideration, therefore no SDLT” advice is unlikely to be correct where a residential property is transferred to a connected limited company.

On the facts given, SDLT is likely to be charged on the property’s market value, and the higher residential rates are likely to apply because the purchaser is a company. On a market value of £285,000, the SDLT liability is likely to be £17,500.

The CGT position also should not be assumed to be nil merely because the property value has only risen slightly. A market value disposal analysis is usually required.

The IHT position may involve the seven-year rule, but it should not be treated as automatically straightforward without reviewing the full structure and any ongoing benefit.

Practical Steps

If you are assessing a similar transfer, the sensible next steps are:

1. Confirm who the legal transferee is. A transfer to an individual is not analysed in the same way as a transfer to a company.
2. Check whether the company is connected with the transferor under the tax rules.
3. Obtain and retain proper market value evidence as at the date of transfer.
4. Recalculate SDLT on the basis that section 53 Finance Act 2003 may apply.
5. Review the CGT computation using market value, acquisition cost, incidental costs, and any capital improvements.
6. Consider the IHT position in full, including whether there is any reservation of benefit or other continuing arrangement.
7. Ensure the transfer documentation accurately records the nature of the transaction, including whether it is intended as a gift.
8. If the SDLT return has already been filed incorrectly, take advice promptly on amendment or disclosure.

Conclusion

Where a parent gifts a rental property to a limited company owned within the family, SDLT is not automatically avoided just because no money is paid and there is no mortgage. In many cases, the company is treated as acquiring the property at market value for SDLT purposes, and the higher residential rates apply. CGT and IHT must also be reviewed separately rather than assumed away.

Legal References Used

• Finance Act 2003, section 53
• Finance Act 2003, SDLT residential charging provisions and higher rates provisions
• HMRC guidance: SDLT on transferring ownership of land or property
• Tax legislation on connected persons as applied to SDLT and CGT market value rules

This page was last updated on 22 March 2026.

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