Do you pay SDLT if you move a property into a company, and can a partnership-to-company transfer be exempt?

Introduction

People often search for this issue when they are buying a new home while still owning another property, or when they want to move a business property from a partnership into a limited company. The SDLT result can be very different depending on whether the property is residential or non-residential, whether it is a replacement of a main residence, and whether the ownership of the partnership and company truly matches.

This article explains two linked SDLT questions in plain English:

• whether transferring an existing property into a company avoids the higher rates on a new home purchase; and
• when a transfer from a partnership to a limited company may attract little or no SDLT under the partnership rules in Schedule 15 to the Finance Act 2003.

The Question

A buyer already owns one property and wants to purchase another dwelling to live in. They are considering transferring the first property into a limited company before buying the new home, hoping this might avoid the higher rates of SDLT for additional dwellings.

Separately, the same person is considering transferring a business property from an existing ownership structure into a limited company. The idea is that the company ownership would mirror the existing ownership as closely as possible. A further complication is that the property may currently be held by one individual, while the company shares are held by more than one person.

The practical questions are:

• Would putting the original property into a company stop the new home being treated as an additional dwelling?
• If not, can the higher rates later be reclaimed if the original home is sold?
• Can a transfer of a business property from a partnership to a limited company be exempt, or largely relieved, where the owners are effectively the same before and after?
• Does it help if the company ownership is changed so that it mirrors the current ownership more closely?

Nick’s Explanation

Nick’s core view was that transferring the original property into a limited company would not solve the higher-rates problem on the new home purchase. In anonymised form, his point was:

If you transfer the original property into a limited company, that transfer itself can trigger SDLT. Also, it will still be treated as an additional property purchase because you have not replaced your only or main residence in the way the legislation requires. The practical choices are usually either to keep the old property and pay the higher rates on the new one, or sell the old home and then claim a refund if the replacement conditions are met.

On the business property transfer, Nick’s explanation focused on the partnership rules and the “sum of the lower proportions” calculation in Schedule 15 to the Finance Act 2003. His broad reasoning was:

Where the partners and the company shareholders are the same people in the same proportions, the sum of the lower proportions may be 100%. If that happens, there may be no SDLT charge, or only a minimal one, because there has been no real change in beneficial ownership.

He also identified the key risk: if the ownership does not genuinely match before and after, the result may be very different. A mismatch between the current ownership of the property and the share ownership of the company can reduce the sum of the lower proportions and create an SDLT charge.

The Law

The main rules come from the Finance Act 2003.

For higher rates on additional dwellings, the relevant rules are in Schedule 4ZA to the Finance Act 2003. Broadly, a purchase of a dwelling can attract the higher rates if, at the end of the day of the transaction, the buyer owns more than one dwelling and is not replacing their only or main residence.

The replacement exception depends on the statutory conditions being met. The wording quoted in the source material reflects paragraph 3 of Schedule 4ZA, especially the rule that the purchased dwelling is treated as a replacement only if:

• the buyer intends the new dwelling to be their only or main residence;
• within the previous three years, the buyer or their spouse or civil partner disposed of a major interest in another dwelling;
• that sold dwelling had been the buyer’s only or main residence at some point in the relevant period; and
• there has not been an intervening acquisition of another dwelling intended to be the only or main residence.

For transfers involving partnerships, the relevant rules are in Schedule 15 to the Finance Act 2003. In particular, paragraph 18 and paragraph 20 deal with transfers of chargeable interests involving partnerships and the “sum of the lower proportions” method. That method looks at the extent to which the persons with interests after the transaction correspond to those with interests before it.

If the sum of the lower proportions is 100%, the SDLT charge may be reduced to nil. If it is below 100%, SDLT can be charged on the non-matching proportion.

Analysis

The two issues should be kept separate, because they involve different SDLT rules.

First, the purchase of the new home.

If a person already owns a dwelling and buys another dwelling, the higher rates usually apply unless the new purchase is a replacement of their only or main residence. Merely transferring the old property into a company does not usually create a qualifying replacement. That is because the legislation focuses on disposal of the old main residence by the buyer or, where relevant, their spouse or civil partner, within the required timeframe and in the required way.

In practical terms, moving the old property into a company is not the same as simply ceasing to own an additional dwelling for these purposes. It is a separate land transaction and may itself trigger SDLT. Also, if the buyer has not completed a genuine disposal that satisfies the replacement conditions, the new purchase is still likely to be treated as an additional dwelling.

That means the common outcome is:

• the new home purchase is charged at the higher residential rates at completion; and
• if the old only or main residence is then sold within the statutory refund period, a refund claim may be possible.

Secondly, the transfer of the business property into a company.

Here, the key question is whether the transfer is truly from a partnership to a company with matching economic ownership. The legislation does not simply ask whether the same family is involved. It applies a technical formula.

The step-by-step approach is broadly as follows:

1. Identify the relevant owners after the transaction.
2. Identify the corresponding partners before the transaction.
3. Work out each person’s proportion before and after.
4. Take the lower of those two proportions for each matching person.
5. Add those lower proportions together to reach the sum of the lower proportions.

If ownership before and after is genuinely identical, the sum may reach 100%. In that case, the SDLT charge can be reduced to nil. But if, for example, the property is owned by one person before the transfer and the company is owned by two people after the transfer, the ownership may not mirror. That can reduce the sum of the lower proportions and produce SDLT on part of the market value or chargeable consideration, depending on the precise structure and facts.

That is why a change in company ownership may matter. If a company shareholder resigns and the company then mirrors the pre-transfer ownership more closely, that may improve the SDLT analysis. But the answer depends on the exact legal position before the transfer:

• Is the property actually partnership property, or is it legally and beneficially owned by one individual?
• Who are the partners, and in what shares?
• Who will own the company immediately after the transfer?
• Are any parties connected?
• Is there debt being assumed by the company?

Those details matter because Schedule 15 is technical and fact-sensitive. A property used in a business is not automatically partnership property just because a partnership business operates from it.

If the issue had involved whether a dwelling was uninhabitable or not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case makes clear that ordinary disrepair or the need for renovation will often not be enough. Although that point does not drive the answer here, it is important in many SDLT residential cases.

Outcome

The practical conclusion is usually this:

• Transferring an existing property into a limited company does not usually prevent a new home purchase from being treated as an additional dwelling.
• The transfer into the company may itself create an SDLT charge.
• If the buyer later sells their previous only or main residence and the statutory conditions are met, they may be able to reclaim the higher rates paid on the new purchase.
• A transfer of a business property from a partnership to a company can sometimes produce no SDLT or only a reduced charge, but only if the Schedule 15 partnership rules apply and the ownership proportions truly match.
• If the property is owned by one person but the company is owned by more than one person, the “mirror ownership” assumption may fail, and SDLT may then arise.

Practical Steps

Anyone assessing a similar SDLT position should work through the facts in this order:

1. Identify whether the new purchase is residential and whether it will be the buyer’s only or main residence.
2. List all dwellings owned by the buyer, and by any spouse or civil partner where the legislation requires that to be considered.
3. Check whether there has been a disposal of a previous only or main residence within the relevant three-year period.
4. Do not assume that transferring a property to a company solves the higher-rates problem. Test the replacement conditions against Schedule 4ZA.
5. For any business property transfer, establish whether the property is legally and beneficially owned by a partnership or by an individual.
6. Map the ownership percentages before and after the transfer and calculate the sum of the lower proportions under Schedule 15.
7. Check whether any debt, mortgage assumption, or connected-party issue affects the SDLT calculation.
8. Obtain the title documents, partnership agreement, company shareholdings, and any valuation before proceeding.

Conclusion

Moving an existing property into a company is not usually a shortcut around the higher SDLT rates on a new home purchase. The new purchase will often still be treated as an additional dwelling unless the statutory replacement rules are actually met. By contrast, a partnership-to-company transfer can sometimes be structured so that SDLT is reduced or eliminated, but only where the ownership analysis under Schedule 15 genuinely supports that result.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 3
• Finance Act 2003, Schedule 15
• Finance Act 2003, Schedule 15, paragraph 18
• Finance Act 2003, Schedule 15, paragraph 20
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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