Guidance on LBTT Group Relief for Companies in the Same Group

LBTT Group Relief for Transfers Within a Corporate Group

LBTT group relief can remove Land and Buildings Transaction Tax on property transfers between companies in the same corporate group, but only if strict legal conditions are met at the effective date of the transaction. The companies must be bodies corporate in the same 75% group, and relief can be denied if there are arrangements involving changes of control, non-group funding, planned degrouping, or tax avoidance.

• Relief may apply where both buyer and seller are companies in the same group, meaning one is a 75% subsidiary of the other or both are 75% subsidiaries of the same parent.
• The 75% test is not just about share ownership; it also looks at rights to distributable profits and assets on a winding-up.
• Relief can be refused if, at the effective date, there are arrangements for someone to gain control of the buyer only, for value to pass in or out of the group, or for the buyer to leave the group.
• A transaction must be for genuine commercial reasons, and relief is blocked if tax avoidance is a main purpose or one of the main purposes of the arrangements.
• Normal lender security over shares does not automatically prevent relief under the modified share pledge rules, provided the lender has not exercised wider control rights; this change applies retrospectively from 1 April 2015.
• Even where relief is available, it must still be claimed through the LBTT return process.

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LBTT group relief for transfers within a corporate group

This page explains when Land and Buildings Transaction Tax relief may be available if land or property is transferred between companies in the same group. The relief can remove an LBTT charge on an internal group transfer, but only if the group relationship and anti-avoidance conditions are satisfied at the effective date of the transaction.

What this rule is about

Group relief is designed for genuine intra-group transfers. If a company moves property to another company in the same group for commercial reasons, the legislation may treat that transfer more favourably so that LBTT is not charged.

The relief is not automatic in every case where two companies are connected. The legislation sets out a specific definition of a group and then restricts relief where there are arrangements involving changes of control, value moving in or out of the group, or tax avoidance.

The relevant rules are in schedule 10 to the Land and Buildings Transaction Tax (Scotland) Act 2013. Revenue Scotland’s guidance summarises those rules, but the legislation is the legal source.

What the official source says

Broadly, relief is available where, at the effective date of the land transaction, both seller and buyer are companies in the same group.

For this purpose, a “company” means a body corporate.

Two companies are in the same group if:

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

A company is a 75% subsidiary only if all three of the following tests are met:

• the parent is the beneficial owner of at least 75% of the ordinary share capital, directly or through other companies under the Corporation Tax Act 2010 rules,
• the parent is beneficially entitled to at least 75% of the profits available for distribution to equity holders, and
• the parent would be beneficially entitled to at least 75% of the assets available for distribution to equity holders on a winding-up.

“Ordinary share capital” excludes share capital that only carries a fixed dividend and no other right to share in profits.

The legislation also applies Corporation Tax Act rules on equity holders, profits and assets available for distribution, with some provisions omitted for LBTT purposes. Control is interpreted using the Corporation Tax Act 2010 definition.

The guidance then identifies three main situations where relief is not available.

First, relief is denied if, at the effective date, arrangements exist under which a person has or could obtain control of the buyer but not the seller. It does not matter whether those arrangements are actually used. There are limited exceptions, including certain arrangements connected with stamp duty acquisition relief and certain demutualisation cases.

Second, relief is denied if a purpose of the transaction is connected with arrangements under which the consideration is provided or received, directly or indirectly, by someone other than a group company. This can also apply where that result is achieved through other linked transactions and payments.

Third, relief is denied if a purpose of the transaction is connected with arrangements under which the buyer ceases, or could cease, to be in the same group as the seller because it stops being a 75% subsidiary. Again, there is a limited exception for certain insurance demutualisation arrangements.

There is also a targeted anti-avoidance rule. Relief is not available if the transaction is not for bona fide commercial reasons, or if it forms part of arrangements whose main purpose, or one of the main purposes, is tax avoidance.

The guidance also covers “share pledges”. Earlier rules could deny relief simply because a lender had security over shares in the buyer, on the basis that the lender could potentially obtain control. The 2018 Order modified the rules so that certain ordinary security arrangements over shares do not, by themselves, block relief, provided the lender has not exercised its rights and does not have wider rights than are needed to protect its position as lender.

That modification now has retrospective effect back to 1 April 2015.

What this means in practice

The starting point is simple: if property is transferred between group companies, group relief may eliminate LBTT on that transfer.

But the practical analysis is not just “are these companies in the same group?” You also need to ask whether anything else is happening around the transaction.

In practice, the relief often turns on four separate questions:

• Are both parties bodies corporate?
• Are they in the same 75% group at the effective date?
• Are there any arrangements affecting control, consideration, or future group membership?
• Is the transaction genuinely commercial, rather than part of tax-driven arrangements?

The effective date matters because the group condition must be met at that time. If the structure only comes into existence later, that will not satisfy the rule as described in the guidance.

The anti-avoidance restrictions matter because they can deny relief even where the buyer and seller are technically in the same group at the effective date. For example, if the transfer is part of a wider plan under which the buyer is to be sold out of the group, that may prevent relief from applying from the outset.

The share pledge modification is especially important in finance-backed structures. Ordinary lending security over shares in the buyer will not necessarily destroy relief. The legislation now recognises that a lender’s protective rights are not the same as a real acquisition of control, provided the lender has not exercised those rights and the rights do not go beyond normal security protection.

How to analyse it

A sensible way to analyse group relief is to work through the following points.

• Identify the buyer and seller and confirm that each is a body corporate.
• Check the effective date of the transaction.
• Map the group structure at that date. Do not rely only on voting rights or headline ownership percentages.
• Test the full 75% subsidiary conditions:
  • ordinary share capital,
  • rights to distributable profits, and
  • rights to assets on a winding-up.
• Consider whether ownership is held directly or through intermediate companies.
• Review any arrangements already in existence at the effective date, even if they may never be implemented.
• Ask whether any person could obtain control of the buyer without obtaining control of the seller.
• Trace where the consideration is really coming from and where it is really going. If non-group persons are funding or receiving value through linked steps, that may be relevant.
• Ask whether the transfer is linked to a sale, degrouping, refinancing, or wider restructuring under which the buyer may leave the group.
• Where there is lending secured on shares, check whether the arrangement falls within the share pledge modification and whether the lender has exercised any enforcement rights.
• Stand back and ask whether the transaction is for bona fide commercial reasons and whether tax avoidance is a main purpose, or one of the main purposes, of the wider arrangements.

If relief is available, it must still be claimed through the LBTT return process referred to in Revenue Scotland’s guidance.

Example

Illustration: Parent Ltd owns 100% of Subsidiary A and 100% of Subsidiary B. Subsidiary A transfers Scottish commercial property to Subsidiary B as part of an internal reorganisation. At the effective date, both companies are 75% subsidiaries of Parent Ltd, and there is no plan for Subsidiary B to be sold outside the group. On those facts, group relief may be available.

Now change the facts. Suppose the property is moved into Subsidiary B shortly before a planned sale of Subsidiary B to an external purchaser, and those sale arrangements already exist at the effective date. In that case, the restriction relating to arrangements under which the buyer ceases, or could cease, to be in the same group may prevent relief.

A further variation: if a bank has ordinary security over the shares in Subsidiary B, that does not automatically block relief, provided the arrangement falls within the modified share pledge rules and the bank has not exercised rights that go beyond normal lender protection.

Why this can be difficult in practice

The hardest cases are usually not about the basic 75% test. They are about the surrounding arrangements.

Several parts of the legislation are deliberately wide. In particular:

• arrangements can matter even if they are not carried out,
• indirect funding or indirect receipt of consideration can be relevant,
• a transaction can fail if only one of its purposes is connected with certain arrangements, and
• the targeted anti-avoidance rule requires judgement about commercial purpose and tax motive.

Control can also be more complicated than simple legal ownership. The legislation points to the Corporation Tax Act definitions, so the analysis may require a close look at rights, powers and economic entitlements.

Share security arrangements are another fact-sensitive area. The modified rules help, but only where the lender’s rights are still in the nature of security and have not been exercised. If the lender has wider rights than are needed merely to protect its position, or can influence the timing or terms of a default event, the exception may not apply.

The retrospective change for share pledges is significant. It means the more favourable modification is treated as having applied from 1 April 2015, not just from 30 June 2018. That may matter when reviewing older transactions.

Key takeaways

• LBTT group relief can remove tax on genuine transfers of property within a corporate group, but only if the statutory group tests are met at the effective date.
• Relief can still be denied where there are arrangements involving changes of control, non-group funding or value extraction, or planned degrouping.
• Ordinary share security in favour of a lender does not automatically block relief if the modified share pledge rules apply, and those changes now operate retrospectively from 1 April 2015.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on LBTT Group Relief for Companies in the Same Group

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