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

Introduction

Companies often ask whether Stamp Duty Land Tax (SDLT) can be avoided when property is transferred within a corporate group. The short answer is that SDLT group relief may be available, but only where the statutory conditions are met strictly.

This is a technical area. It is not enough that the companies are merely “connected” in a general commercial sense. For SDLT group relief, the legislation requires a specific form of group relationship, usually described as a 75% group. There are also anti-avoidance rules and a later clawback risk if the group structure changes.

The Question

A reader asked about a situation where one limited company is buying a property from another limited company, and the conveyancing solicitors suggested that group relief might be claimed from HMRC. The key follow-up question was what counts as a connected company for these purposes, and whether the transfer can qualify for SDLT group relief.

Nick’s Explanation

Nick’s explanation was that the first issue is whether the seller and buyer are actually in the same qualifying group. In anonymised form, his point was:

“If the companies are not part of the same group, the transaction will not qualify for group relief and SDLT is payable in the normal way. If they are in the same group, relief may be available, but only if they meet the 75% test and none of the disqualifying arrangements apply.”

He also explained that the relevant legislation is Schedule 7 to the Finance Act 2003, and that the group relationship must exist at the effective date of the transaction. He highlighted four main points:

• One company must be a 75% subsidiary of the other, or both must be 75% subsidiaries of a third company.
• The 75% test is not just about share capital. It also looks at entitlement to profits and assets on a winding up.
• Even where the group test is met, relief can still be denied if there are disqualifying arrangements under paragraph 2 of Schedule 7.
• Even if relief is validly claimed at the outset, it can later be withdrawn if the purchaser leaves the group within three years in circumstances caught by paragraph 3.

The Law

The main rules are found in Schedule 7 to the Finance Act 2003.

Paragraph 1 provides the basic relief. Broadly, SDLT group relief can 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 1(3), companies are treated as members of the same group if:

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

The meaning of 75% subsidiary is not limited to owning 75% of the ordinary share capital. The legislation also requires the parent to be beneficially entitled to:

• at least 75% of the profits available for distribution to equity holders, and
• at least 75% of the assets available for distribution to equity holders on a winding up.

The detailed rules for working out indirect ownership are linked to sections 1155 to 1157 of the Corporation Tax Act 2010.

Paragraph 2 of Schedule 7 contains important exclusions. Relief is denied in various situations, including where there are arrangements under which:

• a person may obtain control of the purchaser but not the vendor,
• consideration is provided by or received by a person outside the group,
• the companies cease to be members of the same group because of the transaction, or
• the transaction is not effected for bona fide commercial reasons, or forms part of arrangements of which tax avoidance is one of the main purposes.

Paragraph 3 contains the withdrawal or clawback provisions. Broadly, if the purchaser leaves the group within three years, relief may be withdrawn and SDLT can become chargeable as if the relief had never applied, subject to certain exceptions.

Analysis

The practical analysis usually works in five steps.

First, identify the legal buyer and legal seller. Group relief applies to transfers between companies. If one side of the transaction is not a company, Schedule 7 will not help.

Second, test the group relationship at the effective date of the transaction. A general impression that the companies are associated or under common influence is not enough. The statutory 75% tests must be satisfied. In many cases this means checking:

• the shareholding structure,
• the rights attaching to the shares,
• who is entitled to profits, and
• who is entitled to assets on a winding up.

Third, check whether the structure is direct or indirect. A company can still qualify as a 75% subsidiary through a chain of companies, but the calculations must work all the way up the chain under the statutory rules.

Fourth, consider whether any paragraph 2 exclusions apply. This is often where a transaction that looks like an intra-group transfer on paper fails in practice. For example, if the transfer is part of a wider disposal plan, reorganisation, or pre-arranged sale, HMRC may examine whether there were arrangements for control to pass outside the group or whether the transaction lacked bona fide commercial reasons.

Fifth, consider future clawback risk. Even where the relief is valid on day one, it may not stay valid. If the purchaser leaves the group within three years, SDLT may be revived. This means the tax analysis should not stop at completion. The wider planned restructuring matters.

In simple terms, “connected company” is not the statutory test. The real question is whether the companies are members of the same 75% group within Schedule 7 and whether the anti-avoidance rules are avoided.

If they are not in the same 75% group, no group relief is available.

If they are in the same 75% group, relief may be available, but only if:

• the group relationship is properly evidenced,
• there are no disqualifying arrangements, and
• the transaction is undertaken for bona fide commercial reasons.

Outcome

A company buying property from another company does not automatically qualify for SDLT group relief just because the companies are said to be connected.

The likely outcome is as follows:

• If the seller and buyer are not members of the same 75% group at the effective date, SDLT is payable in the ordinary way.
• If they are members of the same 75% group, group relief may be claimed, provided paragraph 2 does not block the claim.
• If relief is claimed but the purchaser leaves the group within three years in circumstances caught by paragraph 3, HMRC may withdraw the relief and assess SDLT.

Practical Steps

Before claiming SDLT group relief, a reader should gather and check the following:

• a current group structure chart,
• the share capital of each relevant company,
• details of rights to profits and winding-up distributions,
• any shareholders’ agreements or constitutional documents affecting control or entitlement,
• the sale contract and any wider transaction documents,
• details of any planned sale, demerger, refinancing, liquidation, or reorganisation after completion, and
• confirmation of the commercial reasons for the transfer.

It is also sensible to ask these specific questions:

• Is one company a 75% subsidiary of the other, or are both 75% subsidiaries of a third company?
• Do the profit and winding-up entitlement tests also pass?
• Are there any arrangements for a third party to acquire control?
• Will any company leave the group within three years?
• Can the transaction be supported as bona fide commercial dealing rather than tax-driven planning?

If there has already been an SDLT filing and tax was paid when group relief may have been available, the documents should be reviewed carefully to see whether an amendment or reclaim route exists and whether the claim is still in time.

Conclusion

SDLT group relief is available only where the statutory 75% group conditions are met and the anti-avoidance rules do not apply. A mere commercial connection between companies is not enough. For any intra-group property transfer, the ownership structure, rights attached to shares, wider arrangements, and three-year clawback risk all need to be checked before relying on the relief.

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.

See all questions and answers categorized in this sitemap. Or use Google site search below.