Can a company claim SDLT group relief when buying property from another group company?

Introduction

Businesses often ask whether Stamp Duty Land Tax (SDLT) can be avoided when one company transfers property to another company in the same corporate group. The short answer is that group relief may be available, but only where the statutory conditions are met in full.

This is a technical area. It is not enough that the companies are simply “connected” in a loose commercial sense. For SDLT group relief, the legislation applies a specific 75% group test and also contains anti-avoidance rules and clawback provisions.

The Question

An adviser asked about a client situation where one limited company was buying a property from another limited company, and the conveyancing solicitors had suggested that SDLT group relief might be available. The practical question was whether relief could be claimed from HMRC and what “connected company” means in this context.

Nick’s Explanation

Nick’s explanation was that the key issue is not general commercial connection, but whether both companies are members of the same qualifying group under Schedule 7 to the Finance Act 2003.

In anonymised terms, his main points were:

• If the seller and buyer are not in the same qualifying group, the transaction does not qualify for SDLT group relief and SDLT is payable in the normal way.
• If they are in the same qualifying group, relief may be available, but only if the 75% group conditions are satisfied and no disqualifying arrangements apply.
• One company must be a 75% subsidiary of the other, or both must be 75% subsidiaries of a third company.
• The test is not limited to share capital alone. It also looks at entitlement to profits and assets on a winding up.
• Even where relief is available on the transaction date, it can later be withdrawn if the purchaser leaves the group within three years, subject to the statutory rules.

Nick also highlighted that these claims need careful review because HMRC may enquire into the SDLT return if the filing position is doubtful.

The Law

The relevant legislation is Schedule 7 to the Finance Act 2003.

Paragraph 1 provides the basic rule for SDLT group relief. Broadly, relief may apply where a land transaction is entered into between companies that are members of the same group at the effective date of the transaction.

Under paragraph 1(2) and paragraph 1(3), companies are treated as members of the same group if:

• one is a 75% subsidiary of the other, or
• both are 75% subsidiaries of a third company.

The meaning of 75% subsidiary is determined by reference to sections 1155 to 1157 of the Corporation Tax Act 2010. In practical terms, the parent company must usually have:

• at least 75% ownership of the ordinary share capital,
• at least 75% entitlement to profits available for distribution, and
• at least 75% entitlement to assets available on a winding up.

Schedule 7 paragraph 2 then restricts relief where certain arrangements exist. These anti-avoidance provisions are important. Relief may be denied, for example, where arrangements are in place under which control of the purchaser could pass outside the group, where consideration is routed through a non-group company, where the companies cease to be group members because of the transaction, or where the transaction is not for bona fide commercial reasons or has tax avoidance as a main purpose.

Paragraph 3 contains the clawback rules. Even if relief is validly claimed at the outset, SDLT can later become payable if the purchaser leaves the group within three years of the effective date, unless a statutory exception applies.

Analysis

When looking at an intra-group property transfer, the analysis should usually be carried out in the following order.

First, identify the legal buyer and legal seller. SDLT group relief applies to companies. If one party is not a company, Schedule 7 relief will not apply.

Second, check the group structure at the effective date of the transaction. The question is whether the two companies are in the same 75% group within the statutory definition. A common shareholder or informal association is not enough by itself.

Third, test the ownership rights properly. It is not sufficient to look only at who holds the shares. The legislation also requires the relevant entitlement to profits and winding-up assets. Some corporate structures fail here even though they appear to be in the same group commercially.

Fourth, consider whether any paragraph 2 disqualifying arrangements exist. This is often the most sensitive part. For example, if the transfer is part of a wider sale or restructuring under which the purchaser is expected to leave the group, relief may be denied from the outset or later clawed back.

Fifth, consider the commercial purpose. The legislation expects the transaction to be for bona fide commercial reasons. Where the main purpose, or one of the main purposes, is tax avoidance, relief may be refused.

Sixth, assess the post-transaction risk. Even where relief is available on day one, the group needs to consider whether the purchaser is likely to leave the group within three years. If so, a later SDLT charge may arise.

In the scenario described, the fact that one group company is buying property from another group company does not automatically mean relief applies. The answer depends on the exact shareholding chain, economic rights, transaction documents, and any wider arrangements connected with the transfer.

Outcome

The practical conclusion is this:

• If the buyer and seller are not members of the same 75% group at the effective date, SDLT group relief is not available.
• If they are members of the same 75% group, relief may be available, but only if none of the paragraph 2 restrictions apply.
• Even if relief is correctly claimed, it may later be withdrawn if the purchaser leaves the group within three years, subject to the statutory exceptions.

So the correct answer is not simply whether the companies are “connected”, but whether they satisfy the precise statutory group test and avoid the anti-avoidance and clawback rules.

Practical Steps

If you are assessing whether SDLT group relief is available, the next steps are usually:

• Obtain the full corporate structure chart for the buyer and seller.
• Check direct and indirect shareholdings.
• Check rights to dividends, profits and assets on a winding up.
• Review the sale agreement and any related agreements.
• Ask whether there is any wider reorganisation, disposal, refinancing or exit plan.
• Check whether the purchaser may leave the group within three years.
• Review whether the transaction is supported by bona fide commercial reasons.
• Ensure the SDLT return is completed consistently with the legal analysis and supporting evidence is retained.

Where the position is not straightforward, the group should have the structure and transaction documents reviewed before filing the SDLT return.

Conclusion

A transfer of property between two companies can qualify for SDLT group relief, but only where the companies fall within the same statutory 75% group and the anti-avoidance and clawback rules do not prevent relief. In practice, the availability of relief turns on the exact ownership structure and the wider transaction arrangements, not on a general impression that the companies are related.

Legal References Used

• Finance Act 2003, Schedule 7
• Finance Act 2003, Schedule 7, paragraph 1
• Finance Act 2003, Schedule 7, paragraph 2
• Finance Act 2003, Schedule 7, paragraph 3
• Corporation Tax Act 2010, sections 1155 to 1157

This page was last updated on 22 March 2026.

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