When a connected company can avoid LTT market value rules
Connected-company LTT exceptions
A company buying property from a connected seller may face LTT based on market value. Section 23 provides three exceptions.
- Two exceptions concern a company holding property as trustee.
- One concerns company asset distributions and earlier group-relief claims.
- Where an exception applies, LTT uses the amount paid.
Scroll down for the full analysis.
Read the original guidance here:
When a connected company can avoid LTT market value rules
If a company buys Welsh property from a connected seller, Land Transaction Tax may normally use the property’s market value instead of the price paid. This can matter a great deal where the price is low. Three exceptions can change that result. If one applies, LTT is worked out using the amount the company pays. LTT is Wales’s land tax, often called stamp duty.
What this rule is about
The starting point is designed to stop connected people setting an artificial low price for a property transfer. Where the rule applies, the tax calculation uses market value on the relevant transaction date if that is higher than the actual amount paid.
That is not always the answer. Section 23 creates three narrow exceptions for particular trust and company-distribution situations.
The key question is not simply whether the buyer and seller are connected. It is whether the facts fit one of the exceptions exactly.
What the official source says
WRA’s technical guidance explains that the connected-company market-value rule does not apply in any of these three cases. If a case applies, LTT is based only on the amount paid for the property.
- Case 1 applies where, immediately after the transaction, the company holds the property as trustee.
- For Case 1, that trusteeship must be part of a business that includes managing trusts.
- Case 2 applies where the company holds the property as trustee immediately after the transaction.
- For Case 2, the seller must be connected with the company only through the special rule in section 1122(6) of the Corporation Tax Act 2010.
- Case 3 requires the seller to be a company and the transfer to be, or form part of, a distribution of that company’s assets.
- Case 3 can apply whether or not the company is being wound up.
- For Case 3, neither the property nor an interest from which it comes can have had a group-relief claim by that seller in the three years before the transaction date.
WRA also says that Case 3 can still apply if such group relief was later withdrawn. WRA explains that the earlier claim has been withdrawn by the date of the later transaction.
What this means in practice
A lower transfer price does not, by itself, make an exception available. The buyer must be a company. The transaction must also meet every part of one of the listed cases.
Timing matters most in the trust cases. The company must hold the property as trustee immediately after the transfer. A plan to put it into a trust later is not the same thing.
- Check market value and the amount paid, as both may affect the calculation.
- Check why the seller and buyer company are connected.
- For a trust arrangement, check the company’s role straight after completion.
- For a distribution, trace the property’s ownership for the preceding three years.
- Check whether the seller claimed group relief on an earlier transfer.
- Do not treat a withdrawn group-relief claim as irrelevant without checking WRA’s published position and the records.
How to analyse it
Start with the general rule, then test the exceptions one at a time. This is usually clearer than beginning with the structure of a group or trust.
- Is the buyer a company?
- Is the seller connected with that company? Or is share consideration involved in the way the market-value rule describes?
- If so, what is the property’s market value compared with the amount paid?
- Will the company hold the property as trustee immediately afterwards?
- If it will, is trust management part of the company’s business, or is the connection limited to the statutory Case 2 connection?
- If this is a company distribution, has the seller made a group-relief claim relating to this property or a derived interest in the previous three years?
- Was any earlier group relief withdrawn before this transaction?
Keep the evidence with the transaction papers. The answer may depend on company records, trust documents and the history of the property. The transfer document is not enough.
Example
Illustration: Green Ltd buys a property from a connected company for £100,000. Its market value is £500,000. Immediately after the transfer, Green Ltd holds it as trustee. Managing trusts is part of its business. This fits Case 1 on these facts. The market-value rule does not apply, so LTT is worked out using £100,000, not £500,000. No tax rate or final tax bill is shown here.
Change one fact and the result may change. If Green Ltd only intends to become trustee later, it does not meet the requirement to hold the property as trustee immediately after the transaction.
Why this can be difficult in practice
These exceptions are fact-specific. Labels such as “trust transfer” or “group restructuring” do not settle the issue. The documents and what happens straight after the transfer matter.
Case 3 can be especially awkward. You may need to trace an earlier interest in the property, rather than looking only for an earlier transfer of the exact same title.
- A low price is not enough to displace market value.
- A company acting for a trust is not enough unless the immediate-after-transfer test is met.
- The special Case 2 connection has a technical statutory meaning.
- A company distribution must also meet the three-year group-relief condition.
- WRA’s statement about withdrawn group relief is guidance, not a replacement for the legislation.
Key takeaways
- Connected-company transfers can be taxed on market value rather than the price paid.
- Three specific trust and distribution exceptions can prevent that result.
- The property history, company relationship and immediate legal position all matter.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- LTTA 2017 section 22 — market value rule for connected company purchases
- LTTA 2017 section 23 — three exceptions to the connected company rule
- LTTA 2017 section 74 — connected-person rules imported from corporation tax law
- LTTA 2017 Schedule 16 para 2 — group relief for transfers within a company group
- LTTA 2017 Schedule 16 para 8 — when group relief is withdrawn after transfer
- an Act of 2010 we do not have an identifier for section 112 — special connection rule used in trustee exception (no link: an Act of 2010 we do not have an identifier for)
Official guidance
The pages below are the Welsh Revenue Authority’s guidance. Guidance is not law. It sets out how the Welsh Revenue Authority reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. the Welsh Revenue Authority can also change or withdraw guidance, and it may not cover your facts.
- Welsh Revenue Authority technical guidance LTTA/2470, Buyer is connected company – exceptions to deemed market value rule
Where this is not settled
- The supplied material does not explain the detailed connection test in Corporation Tax Act 2010 s.1122(6).
- Whether a past group-relief claim was withdrawn, and whether it concerns the same property or a derived interest, may need careful checking.
- The supplied statutory material has no currency notice. Current legislation and WRA guidance should be checked before relying on this page for a later transaction.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The sale documents and the amount the company will give for the property.
- Evidence of the relationship between the seller and buyer company.
- Trust documents and evidence of the company’s trust-management business, where a trustee exception is claimed.
- Company distribution or winding-up documents for the third exception.
- Records of land transfers and any group-relief claims during the preceding three years.
- Evidence that any earlier group relief was withdrawn, where relevant.
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching Land Transaction Tax (LTT), the tax on property in Wales. It replaced Stamp Duty Land Tax in Wales on 1 April 2018, and SDLT does not apply in Wales. MY QUESTION When a connected company can avoid LTT market value rules [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - LTTA 2017 section 22 - market value rule for connected company purchases https://www.legislation.gov.uk/anaw/2017/1/section/22 - LTTA 2017 section 23 - three exceptions to the connected company rule https://www.legislation.gov.uk/anaw/2017/1/section/23 - LTTA 2017 section 74 - connected-person rules imported from corporation tax law https://www.legislation.gov.uk/anaw/2017/1/section/74 - LTTA 2017 Schedule 16 para 2 - group relief for transfers within a company group https://www.legislation.gov.uk/anaw/2017/1/schedule/16/paragraph/2 - LTTA 2017 Schedule 16 para 8 - when group relief is withdrawn after transfer https://www.legislation.gov.uk/anaw/2017/1/schedule/16/paragraph/8 - an Act of 2010 we do not have an identifier for section 112 - special connection rule used in trustee exception Guidance page from the Welsh Revenue Authority on this topic (guidance, not law): https://www.gov.wales/chargeable-consideration-technical-guidance#5187 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from the Welsh Revenue Authority is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The supplied material does not explain the detailed connection test in Corporation Tax Act 2010 s.1122(6). - Whether a past group-relief claim was withdrawn, and whether it concerns the same property or a derived interest, may need careful checking. - The supplied statutory material has no currency notice. Current legislation and WRA guidance should be checked before relying on this page for a later transaction. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 3 September 2026
Useful article? You may find it helpful to read the original guidance here: When a connected company can avoid LTT market value rules
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