Guidance on Withdrawal of Group Relief for Land and Buildings Transaction Tax

When LBTT Group Relief Can Be Withdrawn

LBTT group relief on an intra-group land transfer is not always final when the transaction completes. It can be withdrawn if, within three years, the buyer leaves the seller’s group while still holding the property or an interest derived from it, or if certain paragraph 10A arrangements stop applying. If relief is withdrawn, the buyer must file an LBTT return and tax is usually calculated by reference to market value, or rent for a lease.

• Relief may be clawed back if the buyer leaves the seller’s group within three years of the effective date, or later under arrangements made within that three-year period.
• Withdrawal normally depends on the buyer still holding the original chargeable interest, or a chargeable interest derived from it, when it leaves the group.
• Relief can also be withdrawn where it depended on paragraph 10A arrangements and those arrangements stop qualifying within three years.
• If relief is fully withdrawn, LBTT is charged as if the original transfer had been taxable, using market value of the interest transferred, or rent for a lease.
• If only part of the interest is still held, partial withdrawal may apply, based on the market value of what is still held compared with the full value originally acquired.
• The rules can be fact-sensitive, so groups should monitor ownership changes, transaction arrangements and valuations for three years after the transfer.

Scroll down for the full analysis.

When LBTT group relief is withdrawn

This page explains when Land and Buildings Transaction Tax group relief can be lost after an intra-group transfer, and what the tax effect is if that happens. The main point is that group relief is not always final on the day of the transaction. If the buyer leaves the seller’s group within the relevant period, or certain arrangements stop applying, the relief may be withdrawn and LBTT can become payable later.

What this rule is about

Group relief is intended to prevent an LBTT charge on certain transfers of land within a corporate group. But the relief is subject to anti-avoidance conditions. The legislation looks beyond the transaction itself and asks what happens to the buyer and the property after completion.

The withdrawal rules are designed to stop relief being used where land is moved within a group and then the buyer is separated from that group soon afterwards, while still holding the property or an interest derived from it.

The source material also deals with a separate situation involving arrangements under paragraph 10A. In that case, relief may have been available only because those arrangements existed. If they stop applying within the three-year period, the relief can also be withdrawn.

What the official source says

According to the legislation and Revenue Scotland guidance, group relief is withdrawn if the buyer ceases to be in the same group as the seller:

• within the three years beginning with the effective date of the transaction; or
• under arrangements made within that three-year period, or in connection with such arrangements.

But that is not the whole test. At the time the buyer leaves the group, the buyer must still hold:

• the chargeable interest acquired in the original transaction, or
• a chargeable interest derived from that original interest.

The guidance also says that withdrawal can apply where the interest has not later been acquired at market value in circumstances where group relief was available but simply not claimed.

Group relief is also withdrawn where:

• the relief was available only because of arrangements falling within paragraph 10A, and
• paragraph 10A stops applying to those arrangements within the same three-year period.

The guidance adds an important point on loans: if a loan is repaid before the end of that three-year period, relief is not withdrawn because there are then no longer arrangements to which paragraph 10A could apply.

If relief is withdrawn in full, the LBTT due is the amount that would have been payable on the original transaction. The chargeable consideration is worked out by reference to the market value of the chargeable interest transferred, or rent in the case of a lease transaction.

If relief is only partially withdrawn, the tax is reduced proportionately. The proportion is based on the market value of the interests still held by the buyer when relief is withdrawn, compared with the full market value of the interest the buyer acquired on the effective date of the original transaction.

The buyer is responsible for making an LBTT return if group relief is withdrawn, whether fully or partly.

What this means in practice

The practical question is not just whether group relief was valid when first claimed. You also need to monitor what happens for three years after the effective date.

If the buyer company is sold out of the group during that period, group relief may be clawed back. The risk is greatest where the buyer still owns the property transferred, or still owns a property interest that came out of it.

This means the relief can turn into a deferred tax risk. A transaction that was tax-free at completion can later trigger an LBTT liability if the group structure changes in the wrong way.

The rule can also apply where the buyer leaves the group after the three-year period, if that departure happens under arrangements made during the three-year period or in connection with them. So it is not enough to ask when the exit actually occurred. You also need to ask when the relevant arrangements were made.

Where paragraph 10A is relevant, the relief may depend on arrangements continuing to fall within that provision. If they stop doing so within three years, the relief can be withdrawn even if the buyer has not left the group in the usual sense.

If relief is withdrawn, the tax is not recalculated by reference to the original intra-group consideration. Instead, the legislation points to market value, or to rent for a lease transaction. That can produce a much larger tax charge than some readers expect.

How to analyse it

A sensible way to analyse the issue is to work through the following questions:

• Was group relief claimed on the original land transaction?
• What was the effective date of that transaction?
• Did the buyer cease to be in the same group as the seller within three years beginning with that date?
• If not, did the buyer cease to be in the same group under, or in connection with, arrangements made within that three-year period?
• At the time the buyer left the group, did it still hold the original chargeable interest, or an interest derived from it?
• Has there been any later market value acquisition in circumstances where group relief was available but not claimed?
• Was relief available only because paragraph 10A applied to certain arrangements?
• If so, did paragraph 10A stop applying to those arrangements within three years?
• If relief is withdrawn, is the withdrawal total or only partial?
• What market values are needed to calculate the tax charge or the appropriate proportion?
• Has the buyer filed the LBTT return required on withdrawal?

For partial withdrawal, the valuation exercise matters. The comparison is between:

• the market value of the chargeable interests still held by the buyer when relief is withdrawn, and
• the full market value of the chargeable interest acquired on the effective date of the original transaction.

That comparison determines how much of the original relieved transaction is brought back into charge.

Example

This is an illustration based on the guidance.

Company A transfers land to fellow group company B and group relief is claimed. Two years later, B is sold outside the group. At that point, B still owns the land that was transferred. In that situation, the conditions for withdrawal are likely to be met: B has ceased to be in the same group as A within three years, and it still holds the chargeable interest acquired under the original transaction. The result is that LBTT becomes payable as if the original transfer had been chargeable, using market value as the basis for the tax calculation.

If instead B had only retained part of the property interest, partial withdrawal may apply. The amount of LBTT would then depend on the market value of the retained interest compared with the full market value of what B originally acquired.

Why this can be difficult in practice

Several parts of the rule are fact-sensitive.

First, the concept of leaving the group “in pursuance of, or in connection with, arrangements made” within the three-year period can be wider than a straightforward sale of shares. The timing and nature of the arrangements may need careful analysis.

Second, whether the buyer still holds a “chargeable interest derived from” the original interest can be less obvious than simply asking whether it still owns the same property. The legal steps taken after the original transfer may matter.

Third, the reference to a later acquisition at market value where group relief was available but not claimed may affect whether withdrawal applies. That requires close attention to the sequence of transactions and how they were structured.

Fourth, where paragraph 10A is involved, the source material gives only a limited explanation on this page. In practice, you need to understand exactly why relief was available under that provision and whether the relevant arrangements continued to satisfy it throughout the three-year period.

Finally, valuation can be contentious. Full withdrawal and partial withdrawal both depend on market value concepts, and lease cases may involve rent instead. That can materially affect the amount of LBTT due.

Key takeaways

• LBTT group relief can be clawed back after completion if the buyer leaves the seller’s group within the relevant period and still holds the transferred interest or one derived from it.
• The three-year rule is not limited to exits that physically happen within three years; it can also catch exits carried out under arrangements made within that period.
• If relief is withdrawn, the buyer must file an LBTT return, and the tax is based on market value, or rent for lease transactions, not simply on the original intra-group consideration.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Withdrawal of Group Relief for Land and Buildings Transaction Tax

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