Key Definitions for Group Relief and Company Structures in Tax Guidance

LTT Group Relief: When Companies Count as Being in the Same Group

LTT group relief can reduce or remove tax on land transactions between companies, but only if the buyer and seller meet strict legal tests for being in the same group. The rules look beyond simple ownership percentages and focus on beneficial ownership, entitlement to profits and assets, control, timing, and any wider arrangements connected with the transaction.

• Companies are in the same group only if one is a 75% subsidiary of the other, or both are 75% subsidiaries of a third company.
• To be a 75% subsidiary, the parent must have at least 75% beneficial ownership of ordinary share capital and at least 75% entitlement to distributable profits and winding-up assets.
• Informal plans or understandings can matter because “arrangements” is defined very widely, not just as legally binding contracts.
• Control is also important and can depend on shares, voting rights, constitutional documents, or other powers, with different control tests applying in different parts of the rules.
• Group status is tested at the effective date of the transaction, but later changes to the group can affect whether relief is withdrawn.
• A company may fail the group test even if a parent owns more than 75% of its shares, if special rights mean the parent does not get 75% of profits or winding-up proceeds.

Scroll down for the full analysis.

LTT group relief: key definitions that decide whether companies are in the same group

This page explains the main definitions used in the Land Transaction Tax rules on group relief. These definitions matter because group relief depends heavily on whether the buyer and seller are in the same group, who controls a company, and whether later changes to the group can cause relief to be withdrawn.

What this rule is about

Group relief can remove or reduce LTT on certain land transactions between companies in the same group. But the relief only works if the companies meet specific legal tests. The source material sets out the definitions used throughout those rules.

These are not just drafting points. They affect basic questions such as:

• Is a company really a member of the same group?
• Does a parent company own enough of a subsidiary?
• Who has control of a company?
• If the group later changes, is the relief withdrawn?

In practice, many disputes about group relief start with these definitions.

What the official source says

The official material defines a number of terms used in the LTT group relief rules.

First, “arrangements” is defined very widely. It includes any scheme, agreement or understanding, whether or not legally enforceable. This means the rules can look beyond formal contracts and take account of informal or planned steps.

“Company” means a body corporate. The source notes that this includes a limited liability partnership, although the group relief rules apply to LLPs only in very specific ways.

Companies are members of the same group if one is the 75% subsidiary of the other, or both are 75% subsidiaries of a third company. A company is a 75% subsidiary only if the parent satisfies all of the following tests:

• it is the beneficial owner of at least 75% of the ordinary share capital, directly or through other companies, using the tracing rules in sections 1155 to 1157 of the Corporation Tax Act 2010;
• it is beneficially entitled to at least 75% of the profits available for distribution to equity holders, directly or indirectly; and
• it would be beneficially entitled to at least 75% of the assets available for distribution to equity holders on a winding up, directly or indirectly.

For the profits and assets tests, the source applies the rules in Chapter 6 of Part 5 of the Corporation Tax Act 2010, but says that certain sections are to be treated as omitted.

“Constitutional document” means a memorandum or articles of association, or a similar document regulating the affairs of a joint venture company.

“Control” takes its meaning from sections 450, 451 and 1124 of the Corporation Tax Act 2010. Broadly, this means the power to secure that the company’s affairs are conducted in accordance with a person’s wishes, whether through shares, voting power, the articles, or another document regulating the company. The source also notes that different control provisions are used for different parts of the group relief rules:

• for restrictions on the availability of group relief, control is determined under section 1124;
• for cases where relief is not withdrawn when the seller leaves the group, control is determined under sections 450 and 451.

“Group company” means a company that, at the effective date of the land transaction, is in the same group as the purchaser or seller.

“Joint venture company” means a company with two or more member companies which carries on a commercial activity governed by an agreement regulating the affairs of the members.

“Member” has a different meaning depending on context. In relation to a company, it means a company that is in a group of companies. In relation to a joint venture company, it means a holder of shares or securities in that joint venture company.

“Mortgage” means any legal or equitable charge in England and Wales and Northern Ireland, and any right in security in Scotland.

“Non-group company” simply means a company that is not a group company.

“Ordinary share capital” means all issued share capital, by whatever name called, except share capital that gives only a fixed dividend and no other right to participate in profits.

“Relevant associated company” is specially defined for the rules on withdrawal and non-withdrawal of group relief. The exact meaning changes slightly depending on which paragraph is being applied, but the common theme is that it refers to a company in the same group at the point before the buyer leaves the seller’s group, and whose group position changes as a consequence of that event.

“Relevant transfer of business or engagement” covers certain transfers to which the building societies, friendly societies, or co-operative and community benefit society and credit union reliefs would apply, as described in Schedule 22.

Finally, a “relieved transaction” is a transaction relieved from LTT because a claim to group relief has been made.

What this means in practice

The most important practical point is that group relief is not based on a simple idea of common ownership. The legislation uses a strict 75% group test with three separate economic tests:

• share capital,
• profits, and
• assets on a winding up.

A company may appear to be a subsidiary in everyday commercial terms but still fail the tax definition if, for example, special rights attached to shares mean the parent is not entitled to 75% of profits or winding-up assets.

The emphasis on beneficial ownership and beneficial entitlement also matters. The rules are concerned with who truly enjoys the rights, not just who appears on a register or holds legal title in a formal sense.

The wide definition of “arrangements” is also significant. If a transaction is part of a wider plan, the analysis may take account of the whole plan, even where some steps are informal or not legally binding.

The definition of “group company” by reference to the effective date means timing matters. A company must be in the same group at the legally relevant date for the transaction. Group structure before or after that date may still matter for withdrawal rules, but the starting point is the position at the effective date.

The control definitions are relevant because some parts of the legislation look not only at ownership but also at who can direct the company’s affairs. This can be important where voting rights, constitutional documents, shareholder agreements, or other powers do not match the economic ownership pattern.

How to analyse it

A sensible way to approach these definitions is to work through the following questions.

• What is the exact transaction for which group relief is being claimed?
• Who are the buyer and seller at the effective date?
• Are they in the same group under the 75% subsidiary test?
• Does the alleged parent satisfy all three 75% tests: ordinary share capital, distributable profits, and winding-up assets?
• Are rights held directly, or do they need to be traced through intermediate companies?
• Are there any special share rights, fixed-dividend shares, securities, or constitutional provisions that affect entitlement?
• Is any person able to control the company through voting power, constitutional documents, or other arrangements?
• Is there a joint venture structure that may change how the company should be analysed?
• Are there wider arrangements surrounding the transaction that may be relevant?
• Could a later departure from the group trigger withdrawal of relief, and if so which special definitions apply?

This is a definition-heavy area, but the exercise is practical: map the legal rights, not just the headline ownership percentages.

Example

Illustration: Parent Ltd owns 80% of the ordinary shares in Subsidiary Ltd. At first glance that suggests Subsidiary Ltd is a 75% subsidiary. But suppose another class of shares gives outside investors a large share of distributable profits and winding-up proceeds. If Parent Ltd is entitled to less than 75% of those profits or assets, Subsidiary Ltd may fail the group test even though Parent Ltd owns more than 75% of the ordinary share capital.

That matters because a land transfer between Parent Ltd and Subsidiary Ltd may then fall outside group relief.

Why this can be difficult in practice

The main difficulty is that the legal test is more detailed than the group chart used for commercial or accounting purposes.

Several points can create uncertainty:

• beneficial ownership and beneficial entitlement may not be obvious from the share register alone;
• different classes of shares or securities may alter rights to profits or assets;
• joint venture arrangements can complicate questions of membership and control;
• the legislation borrows concepts from the Corporation Tax Act 2010, so the analysis may require careful reading of those provisions;
• the meaning of “control” is not identical for every part of the group relief rules.

There is also a practical trap in assuming that a company is a group member because it is described that way in internal documents or accounts. For LTT group relief, the statutory definitions are what matter.

Key takeaways

• For LTT group relief, being in the same group depends on a strict statutory 75% test, not just general commercial ownership.
• The test looks at ordinary share capital, entitlement to distributable profits, and entitlement to winding-up assets.
• Timing, control, and wider arrangements can all affect whether relief is available or later withdrawn.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Key Definitions for Group Relief and Company Structures in Tax Guidance

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