Do you pay SDLT on market value when a company buys property from a connected person?

Introduction

This is a common question where a property is transferred within a family but the buyer is a limited company rather than an individual. People often assume Stamp Duty Land Tax (SDLT) will be charged on the price actually paid. In some cases, however, the legislation replaces the price with the property’s market value. That can produce a higher SDLT bill and may leave no basis for a refund.

The Question

A property was bought by a company from a family member at a price below market value. The buyer wanted to know whether SDLT should have been calculated on the lower transfer price, or whether HMRC was right to apply SDLT to the full market value of the property.

Nick’s Explanation

Nick’s view was that the market value rule applied and that there was no realistic basis for reclaiming SDLT. In substance, his explanation was:

Where the purchaser is a company and the seller is connected with that company, Section 53 of the Finance Act 2003 requires SDLT to be charged on not less than the market value of the property at the effective date of the transaction. If those conditions are met, HMRC does not use the discounted or actual price if it is lower than market value.

He also explained that, in a family transfer structured through a limited company, the connected party rules are strict and there are very few exceptions. On that basis, the SDLT treatment used on the transaction was correct.

The Law

The key provision is section 53 of the Finance Act 2003. Its effect is that where:

• the purchaser is a company, and
• the vendor is connected with the purchaser,

the chargeable consideration for SDLT purposes is taken to be at least the market value of the property at the effective date of the transaction.

In practical terms, that means SDLT is not necessarily charged on the amount actually paid. Instead, the legislation substitutes market value where a connected company acquisition falls within section 53.

The connected party concept is a tax law concept. Broadly, family relationships and company relationships can create connection for these purposes. Where a company is used to acquire property from a connected individual, the market value rule is often triggered automatically.

Analysis

The position can be worked through in a series of steps.

First, identify the purchaser. If the buyer is a company, section 53 may apply.

Second, identify the seller and ask whether the seller is connected with the purchaser for tax purposes. If the seller is a family member who is connected to the company through ownership or control rules, the condition is likely to be met.

Third, compare the actual consideration with the market value of the property. If section 53 applies, the SDLT calculation cannot be based on an amount lower than market value.

Fourth, consider whether any exception displaces the rule. In ordinary connected-party family transfers to a company, there is usually no exception that allows SDLT to be charged on the discounted price instead.

Applying that framework here, the critical features are:

• the purchaser was a company;
• the seller was a connected family member; and
• the transaction was therefore caught by the deemed market value rule.

Once those facts are present, HMRC is entitled to assess SDLT by reference to market value rather than the lower amount paid. That is why a refund argument is unlikely to succeed.

Outcome

If a company buys a property from a connected person, SDLT will generally be charged on market value under section 53 of the Finance Act 2003. In that situation, paying a lower price does not usually reduce the SDLT liability. On those facts, the SDLT calculation based on market value is likely to be correct, and a refund is unlikely.

Practical Steps

If you are checking your own position, the sensible steps are:

• confirm whether the purchaser was a company;
• check whether the seller was connected with the company under the tax rules;
• obtain evidence of the property’s market value at the effective date of the transaction;
• review the SDLT return to see what consideration figure was used;
• consider whether any specialist SDLT exception could apply, although in most straightforward connected-party company purchases it will not;
• keep the transfer documents, valuation evidence and any advice received in case HMRC asks for support.

If the transaction involved a claim that the property was uninhabitable or not suitable for use, that is a separate issue and the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

Where a company acquires property from a connected person, SDLT is usually charged on market value, not the discounted price actually paid. In a family transfer to a limited company, that rule often applies automatically, so a refund claim is unlikely to succeed if the SDLT was already calculated on market value.

Legal References Used

• Finance Act 2003, section 53
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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