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

When LBTT Group Relief Is Withdrawn

LBTT group relief on an intra-group property transfer can be withdrawn if the buyer leaves the seller’s group within three years, or under arrangements made in that period, and still holds the property or a related interest. If that happens, the buyer may have to pay the LBTT that would originally have been due, in full or in part, and must file an LBTT return.

• Relief can be clawed back if the buyer stops being in the same group as the seller within three years of the transaction’s effective date.
• The rule can also apply if the buyer leaves later but the exit is linked to arrangements made within that three-year period.
• Withdrawal usually only applies if, when leaving the group, the buyer still holds the original chargeable interest or an interest derived from it.
• If only part of the relevant interest is still held, the relief may be withdrawn only in part, based on market value.
• Special rules apply where relief depended on paragraph 10A arrangements; if those arrangements stop qualifying within three years, relief may be lost, although early loan repayment can prevent this.
• If relief is withdrawn, the tax is based on what would have been due on the original transaction, and the buyer is responsible for filing the LBTT return.

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When LBTT group relief is withdrawn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 property transfer, and what happens if it is. The point matters because a transaction that originally qualified for relief can later become taxable if the companies stop being in the same group within the relevant period.

What this rule is about

Group relief is designed to remove LBTT on certain transfers of land within a corporate group. But the relief is not always final on the day of the transaction. The legislation contains clawback rules which can revive a tax charge if the group relationship later breaks down in specified circumstances.

The main concern is that land could be moved within a group tax-free and then the buyer company could leave the group soon afterwards, effectively taking the property out of the group without the normal tax charge. The withdrawal rules are aimed at that outcome.

What the official source says

According to the Revenue Scotland guidance, group relief is withdrawn if the buyer stops being a member of the same group as the seller:

• within the three years beginning with the effective date of the transaction, or
• because of arrangements made within that three-year period.

For withdrawal to apply, the buyer must still hold, at the time it leaves the group:

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

The guidance also says that withdrawal does not apply in relation to an interest that has later been acquired at market value in circumstances where group relief was available but not claimed.

There is a separate rule for cases where relief was available only because of arrangements falling within paragraph 10A of schedule 10 to the LBTT(S)A 2013. If, within the three years beginning with the effective date of the transaction, paragraph 10A stops applying to those arrangements, the relief is also withdrawn.

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

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

The buyer is responsible for making an LBTT return if group relief is withdrawn, in whole or in part.

What this means in practice

The practical effect is that an intra-group transfer can remain exposed to LBTT for three years after completion.

The first question is whether the buyer company remains in the same group as the seller throughout that period. If it does not, you then look at whether the buyer still holds the property, or something derived from it, when it leaves the group. If both conditions are met, the original relief can be clawed back.

This means post-transaction group reorganisations matter. A sale of the buyer company, a demerger, or another restructuring can trigger withdrawal if it happens within the three-year period, or if it happens later under arrangements made within that period.

The rule is not limited to the exact land interest acquired on day one. It can also apply where the buyer still holds a derived chargeable interest. So disposing of or reshaping the original title does not necessarily remove the risk.

If the buyer no longer holds all of the relevant interest when it leaves the group, only part of the relief may be withdrawn. In that case, the legislation looks at relative market values.

Where paragraph 10A is relevant, the relief can also be withdrawn even if the normal group departure rule is not the issue. The source material makes clear that this depends on whether the arrangements which supported the relief continue to satisfy paragraph 10A during the three-year period.

How to analyse it

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

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

In practice, this analysis often requires reviewing transaction documents, later restructuring steps, and the ownership history of the land after the original transfer.

Example

Illustration: Company A transfers land to fellow group company B and group relief is claimed. Eighteen months later, B is sold out of the group. At that time B still owns the land. On the guidance, the group relief is withdrawn because B ceased to be in the same group as A within three years and still held the chargeable interest when it left.

The tax then becomes the LBTT that would have been payable on the original transfer, calculated by reference to market value rather than the relieved amount.

If instead B had disposed of part of the property before leaving the group and retained only part of the relevant interest, the withdrawal may be only partial. The amount would then depend on the market value of what B still held when it left the group compared with the market value of what it originally acquired.

Why this can be difficult in practice

Several parts of the rule are fact-sensitive.

First, the phrase “in pursuance of, or in connection with, arrangements made within that three year period” can require careful analysis. A company might leave the group after the three-year period, but if that departure is linked to arrangements put in place during the period, the relief may still be at risk.

Second, whether the buyer still holds “a chargeable interest derived from” the original interest may not always be straightforward. Changes to title, leases, sub-sales, partitioning, or other property steps may need detailed review.

Third, partial withdrawal depends on market value comparisons at different points in time. That can create valuation issues, especially where only part of the original property remains or where the nature of the retained interest has changed.

Fourth, the paragraph 10A rule is highly dependent on the exact arrangements in place. The source material gives one specific indication: repayment of the relevant loan before the end of the three-year period means relief is not withdrawn because there are then no arrangements to which paragraph 10A could apply. Beyond that, the application of paragraph 10A will depend on the facts and the statutory wording.

Finally, the compliance point should not be overlooked. The guidance expressly places responsibility on the buyer to file an LBTT return if relief is withdrawn to any extent.

Key takeaways

• LBTT group relief can be clawed back if the buyer leaves the seller’s group within three years and still holds the relevant land interest or a derived interest.
• The risk can also arise where the departure happens under arrangements made within that three-year period, or where paragraph 10A stops applying to arrangements that supported the relief.
• If relief is withdrawn, the buyer must account for the tax that would originally have been due, in whole or in the appropriate proportion, and must make an LBTT return.

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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