Exceptions to Deemed Market Value Rule for Connected Company Property Acquisitions

When market value is not used for LTT on purchases by a connected company

Usually, if a company buys property from a connected person, Land Transaction Tax may be charged on the property’s market value instead of the price actually paid. However, this market value rule does not apply in three specific situations. Where one of those exceptions applies, LTT is charged only on the actual chargeable consideration.

• The first exception applies if, immediately after the transaction, the company holds the property as trustee in the course of a trust management business.
• The second exception applies if, immediately after the transaction, the company holds the property as trustee and the seller is connected with the company only because of section 1122(6) of the Corporation Tax Act 2010.
• The third exception applies where the seller is a company and the transfer is, or is part of, a distribution of assets, including on a winding up.
• For the third exception, the property transferred, or any interest from which it is derived, must not have been the subject of a group relief claim by the seller in the three years before the effective date.
• If an earlier group relief claim had been withdrawn by the effective date, the third exception may still apply.
• In practice, it is important to check the company’s role immediately after completion, the exact reason the parties are connected, and any recent group relief history.

Scroll down for the full analysis.

When the deemed market value rule does not apply to a connected company buyer for LTT

This page explains a narrow but important exception to the usual Land Transaction Tax rule for purchases by a company from a connected person. Normally, where a company buys property from someone connected with it, the transaction may be taxed by reference to market value rather than the actual price paid. The source material sets out three situations where that deemed market value rule does not apply. If one of those situations applies, tax is charged only on the actual chargeable consideration.

What this rule is about

LTT contains anti-avoidance rules for transactions between connected parties. The concern is that connected persons may agree a price that is lower than the property’s true value. To deal with that risk, the legislation can substitute market value for the actual consideration.

The page you have provided deals with exceptions to that rule where the buyer is a connected company. In these cases, even though the buyer and seller are connected, the law does not automatically replace the actual price with market value.

This matters because the tax result can be very different. If the market value rule applies, LTT is calculated on the property’s market value. If an exception applies, LTT is calculated only on the chargeable consideration actually given for the transaction.

What the official source says

The official material says the deemed market value rule does not apply in three cases.

Case 1 applies where, immediately after the transaction, the company holds the property as trustee in the course of a business of managing trusts.

Case 2 applies where, immediately after the transaction, the company holds the property as trustee and the seller is connected with the company only because of section 1122(6) of the Corporation Tax Act 2010.

Case 3 applies where:

• the seller is a company, and
• the transaction is, or forms part of, a distribution of assets, whether or not on a winding up, and
• the property being transferred, or an interest from which it is derived, has not been the subject of a claim by the seller to group relief in the three years before the effective date of the transaction.

The source also adds an important point on Case 3. If the seller had previously claimed group relief but that relief has later been withdrawn, the Case 3 exclusion can still apply. The reason given is that, by the effective date of the transaction in question, the earlier claim is treated as no longer standing.

Where any of these exceptions applies, LTT is charged only on the chargeable consideration actually paid.

What this means in practice

The starting point is to ask whether the buyer is a company and whether the seller is connected with it. If so, the market value rule may be in play. But that is not the end of the analysis.

You then need to check whether one of the three exceptions removes the market value substitution.

In trustee cases, timing matters. The source repeatedly says “immediately after the transaction”. That means you look at the company’s capacity and role straight after completion. If the company then holds the property as trustee in the required circumstances, the exception may apply.

In the distribution of assets case, the focus shifts to the nature of the transfer and the seller’s history of group relief claims. A distribution by a company does not qualify automatically. You must also check whether the property, or a related interest from which it is derived, was the subject of a group relief claim by the seller within the previous three years. If it was, the exception is blocked unless that relief had been withdrawn by the effective date.

The practical consequence is simple but significant: if an exception applies, you do not substitute market value. You use the actual chargeable consideration.

How to analyse it

A sensible way to analyse the point is to work through these questions in order.

• Is the buyer a company?
• Is the seller connected with that company?
• If yes, would the deemed market value rule normally apply?
• Does the company hold the property immediately after the transaction as trustee in the course of a trust management business? If so, consider Case 1.
• Does the company hold the property immediately after the transaction as trustee, with the seller connected only by the specific rule in section 1122(6) of the Corporation Tax Act 2010? If so, consider Case 2.
• Is the seller a company, and is the transfer a distribution of assets or part of one? If so, consider Case 3.
• For Case 3, has the seller claimed group relief for the property, or for an interest from which the transferred property is derived, within the three years before the effective date?
• If there was a claim, had that relief been withdrawn by the effective date? If yes, the source says the Case 3 exclusion can still apply.

The key is not to stop at the fact that the parties are connected. The exceptions are specific, and each has its own conditions.

Example

Illustration: Company A transfers land to Company B, which is connected with it. If nothing else applies, LTT might be charged on market value rather than the actual price.

Now suppose instead that the transfer is part of a distribution of assets by Company A, and neither the land nor any relevant prior interest from which it is derived has been the subject of a group relief claim by Company A in the three years before the transaction takes effect. In that case, under the source material, the deemed market value rule does not apply. LTT is then charged on the actual chargeable consideration.

If there had once been a group relief claim, but that relief had already been withdrawn by the effective date, the source says the same result can still follow.

Why this can be difficult in practice

The source is short, but the underlying concepts can be fact-sensitive.

First, whether a company holds property “as trustee” and whether that is done “in the course of the business of the management of trusts” may depend on the legal capacity in which the company acquires and holds the property. That usually requires looking carefully at the transaction documents and the surrounding trust arrangements.

Second, Case 2 depends on a very specific type of connection, namely that the seller is connected with the company only because of section 1122(6) of the Corporation Tax Act 2010. The word “only” matters. If there is any additional basis of connection, the exception may not be available.

Third, Case 3 requires careful checking of past group relief claims. The source extends beyond the exact property transferred to include an “interest from which” the transferred subject-matter is derived. That can require tracing title history or earlier restructuring steps.

Finally, the source refers to the effective date of the transaction. In practice, the availability of the exception may depend on the position at that date, including whether any earlier group relief claim has by then been withdrawn.

Key takeaways

• A connected company buyer is not always taxed on market value for LTT purposes.
• There are three specific exceptions: certain trustee situations and certain company asset distributions.
• If an exception applies, LTT is charged on the actual chargeable consideration, not deemed market value.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Exceptions to Deemed Market Value Rule for Connected Company Property Acquisitions

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