Is SDLT payable when a parent gifts residential properties to a connected company?

Introduction

A common question is whether Stamp Duty Land Tax (SDLT) can be avoided if a parent transfers property to a family company for no payment. Many people assume that, because the transfer is a gift, there is no SDLT. In some cases that is true. But where the buyer is a company connected with the transferor, the rules are very different.

This article explains why a gift of residential property to a connected company is usually still chargeable to SDLT, and why the tax is generally calculated by reference to market value rather than the amount actually paid.

The Question

A family is considering transferring three mortgage-free leasehold flats from a parent to a company owned and controlled by the child. The transfer is intended to be a gift, with no money changing hands. The main question is whether SDLT can be avoided or reduced because the properties are being given to the company rather than sold.

Nick’s Explanation

Nick’s explanation was that the gift does not remove the SDLT charge where the buyer is a connected company. In summary:

• A transfer of property to a company is still a land transaction for SDLT purposes.
• Although gifts can fall outside SDLT where there is no chargeable consideration, that treatment is displaced if the purchaser is a company connected with the transferor.
• In that situation, section 53 Finance Act 2003 applies a market value rule.
• That means SDLT is calculated on the open market value of the properties, even though no price is paid.
• Where the company acquires residential dwellings, the higher residential rates will usually apply.

Put shortly, Nick’s view was that the company would be treated as acquiring the properties for their full market value, and SDLT would be payable on that deemed consideration.

The Law

SDLT is charged under Part 4 of the Finance Act 2003 on land transactions involving the acquisition of a chargeable interest in land.

Section 42 Finance Act 2003 imposes the charge, and section 43 Finance Act 2003 defines a land transaction widely enough to include a transfer of legal ownership of leasehold or freehold property.

Normally, SDLT is based on chargeable consideration. Where property is given away and there is no consideration, Schedule 3 Finance Act 2003 may mean that no SDLT arises.

However, section 53 Finance Act 2003 creates a special rule for certain company transactions. Where the purchaser is a company and the transaction is between connected persons, the chargeable consideration is deemed to be the market value of the subject matter of the transaction.

Whether persons are connected is determined by section 1122 of the Corporation Tax Act 2010. Connections can arise through family relationships and through control of a company. A parent and child are connected persons, and a person who controls a company is connected with that company.

If the property being acquired is residential and the buyer is a company, the higher rates for additional dwellings are generally in point under Schedule 4ZA Finance Act 2003. For company purchasers of dwellings, the higher residential rates commonly apply from the outset.

Analysis

The analysis usually works in the following order.

1. First, there is a land transaction. A transfer of leasehold flats from an individual to a company is plainly an acquisition of chargeable interests in land.

2. Second, the fact that the transfer is described as a gift does not end the SDLT analysis. A gift can avoid SDLT only if no chargeable consideration arises and no special deeming rule applies.

3. Third, the connected company rule must be considered. If the company is controlled by the child of the transferor, the transferor is connected both with the child and, through that relationship and control structure, with the company for these purposes.

4. Fourth, once section 53 Finance Act 2003 applies, the absence of actual payment becomes irrelevant. The law substitutes market value as the chargeable consideration.

5. Fifth, the SDLT rates must be identified. If the assets are residential dwellings and the buyer is a company, the higher residential rates will usually apply. The transaction is therefore taxed as a residential acquisition by a company, not as a nil-consideration gift.

So, if three residential flats with a total market value of £530,000 are transferred by a parent to a connected company for no payment, the company is generally treated as giving consideration of £530,000 for SDLT purposes.

The practical result is that SDLT is charged by reference to that market value. The gift element does not prevent the tax charge.

This conclusion assumes the properties are all residential and that there is no special relief available. It also assumes the transaction is not mixed-use and does not fall within any other relieving provision.

Outcome

The practical answer is that SDLT is usually payable when a parent gifts residential properties to a company controlled by their child. The company is treated as acquiring the properties at market value under section 53 Finance Act 2003, and the higher residential rates will generally apply.

In short, transferring the properties as a gift does not usually avoid SDLT in this connected-party company scenario.

Practical Steps

Anyone considering this kind of transfer should check the following before proceeding:

• Whether the buyer company is connected with the transferor under section 1122 Corporation Tax Act 2010.
• Whether the properties are wholly residential, or whether any mixed-use argument genuinely exists.
• The current market value of each property, supported by proper evidence.
• Whether any mortgage or other debt is attached, as that can also affect SDLT.
• Whether any specific SDLT relief could apply, though in a straightforward family-to-company gift this is often unlikely.
• Whether there are wider tax consequences, including Capital Gains Tax and inheritance tax issues, as SDLT is only one part of the picture.

Where significant value is involved, the SDLT position should be calculated in advance so that the company knows the likely filing and payment obligation before the transfer takes place.

Conclusion

A gift of residential property to a connected company is not usually free of SDLT. If a parent transfers dwellings to a company controlled within the family, section 53 Finance Act 2003 generally taxes the company on the market value of the properties, and the higher residential rates will usually apply.

Legal References Used

• Finance Act 2003, section 42
• Finance Act 2003, section 43
• Finance Act 2003, section 53
• Finance Act 2003, Schedule 3
• Finance Act 2003, Schedule 4ZA
• Corporation Tax Act 2010, section 1122

This page was last updated on 22 March 2026.

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