Is SDLT payable when a property is gifted to another person’s company for no consideration?

Introduction

A common SDLT question is whether tax is due when a property is transferred as a gift, especially where the recipient is a company and no money is being paid. The answer usually turns on one point: whether there is any chargeable consideration. In simple terms, SDLT is generally charged by reference to what is given in return for the property. If nothing of value is given, the transfer may be exempt. But if the recipient takes on a mortgage or other debt, that can count as consideration even where no cash changes hands.

The Question

A property owner wants to transfer a property to a company owned by friends. The transfer is intended to be a gift for nil consideration, with no payment being made on the transfer. The parties are said not to be connected persons. The issue is whether SDLT is payable in those circumstances.

Nick’s Explanation

Nick’s core view was that the starting point is chargeable consideration. In anonymised form, his explanation was:

“If the transfer is genuinely for nil chargeable consideration, and the recipient company does not assume any mortgage or other debt, the transaction is exempt from SDLT under paragraph 1(1) of Schedule 3 to Finance Act 2003. If, however, the company takes over liability for an existing mortgage or secured debt, that assumed debt counts as chargeable consideration and SDLT may then arise.”

He also noted that the market value rule for connected companies would not normally apply if the transferor and the recipient company are not connected persons on the facts.

The Law

SDLT is charged on land transactions under section 42 of the Finance Act 2003. A transfer of ownership of property is a land transaction under section 43(1) because it involves the acquisition of a chargeable interest.

The key issue is whether there is chargeable consideration. Sections 50 and Schedule 4 of the Finance Act 2003 deal with this. As a general rule, chargeable consideration means money or money’s worth given for the transaction. It is not limited to cash. Paragraph 8 of Schedule 4 makes clear that the assumption, release or satisfaction of debt can count as chargeable consideration.

Schedule 3 contains exemptions. Paragraph 1(1) of Schedule 3 provides that a land transaction is exempt from charge if there is no chargeable consideration for the transaction.

There are also market value rules in some cases. Section 53 of the Finance Act 2003 can deem market value to be the consideration in certain transactions involving connected companies. Whether parties are connected for these purposes is determined by reference to section 1122 of the Corporation Tax Act 2010.

Analysis

The analysis is usually straightforward if approached in stages.

First, a transfer of a property to a company is a land transaction. So the SDLT rules are engaged.

Second, you ask what, if anything, the company is giving in return. If the answer is truly nothing, then there is no chargeable consideration. That would normally bring the transaction within the exemption in paragraph 1(1) of Schedule 3.

Third, you must check carefully for hidden or indirect consideration. The most common example is mortgage debt. If the property is subject to a mortgage and the company takes the property subject to that debt, or otherwise assumes responsibility for it, the amount of debt taken on can be chargeable consideration. In that situation, the transfer is not truly for nil consideration even if no purchase price is paid.

Fourth, consider whether any market value rule applies. In the scenario described, the transferor and the recipient company are said not to be connected persons. If that is correct, section 53 would not usually substitute market value simply because the transfer is a gift.

So the practical result is this: a gift of property to an unconnected company can be exempt from SDLT, but only if there is genuinely no chargeable consideration of any kind.

It is also important not to confuse SDLT with other tax issues. Even where SDLT is not payable, a gift of property can still raise separate questions about capital gains tax, company tax treatment, and in some cases inheritance tax. Those are different regimes and do not alter the SDLT analysis itself.

Outcome

If the property is transferred to the company for genuinely nil consideration, and the company does not assume any mortgage or other debt, the transfer will generally be exempt from SDLT under paragraph 1(1) of Schedule 3 to the Finance Act 2003.

If the company does assume a mortgage or any other debt connected with the property, that assumed liability may be chargeable consideration and SDLT may become payable based on that amount.

The fact that the parties are not connected persons is relevant because it means the connected-company market value rule would not usually apply on the stated facts.

Practical Steps

Before concluding that no SDLT is due, a reader should check:

• whether the property is completely free of mortgage or secured debt;
• whether the recipient company will take the property subject to any existing borrowing;
• whether any other form of value is being given in return, directly or indirectly;
• whether the transferor and the recipient company are in fact unconnected under section 1122 of the Corporation Tax Act 2010;
• whether any separate tax consequences arise outside SDLT, particularly capital gains tax.

It is also sensible to review the transfer documentation and any mortgage position carefully, because SDLT outcomes often turn on the legal effect of the documents rather than the informal description of the arrangement as a “gift”.

Conclusion

A gift of property to another person’s company can be free of SDLT if there is truly no chargeable consideration. The main trap is debt: if the company takes on a mortgage or similar liability, that can trigger SDLT even where no money is paid. If there is no payment, no debt assumption and no connected-party market value rule in point, the transfer will usually be exempt.

Legal References Used

• Finance Act 2003, section 42
• Finance Act 2003, section 43(1)
• Finance Act 2003, section 49
• Finance Act 2003, section 50
• Finance Act 2003, section 53
• Finance Act 2003, Schedule 3, paragraph 1(1)
• Finance Act 2003, Schedule 4, paragraph 1(1)
• Finance Act 2003, Schedule 4, paragraph 8
• Corporation Tax Act 2010, section 1122

This page was last updated on 22 March 2026.

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