Group Relief from Stamp Duty Land Tax – When does it apply?
It is important to consider the availability of “Group Relief” from Stamp Duty Land Tax (“SDLT”) when deciding how best to structure land transactions between members of the same SDLT group. If Group Relief is available, it will result in no SDLT being payable on such transactions and therefore the savings could be significant. However, it is important the rules are applied correctly to avoid being caught out.
This note provides a basic summary of the rules relating to the relief and when it applies
SDLT Group
For SDLT group relief to potentially apply, there must first be a qualifying SDLT group. The relief is available for transfers between companies that are members of the same group at the effective date of the transfer.
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 (A) is a 75% subsidiary of another (B) if B is the beneficial owner of not less than 75% of the ordinary share capital of A, is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of A and would be beneficially entitled to not less than 75% of any assets of A available for distribution to its equity holders on a winding-up.
The companies must also be bodies corporate to qualify for group relief and SDLT groups cannot be formed merely through common individual shareholders.
Example
Here is a good example in which Group Relief would apply:
- Company A and Company B are direct subsidiaries of Company X.
- 90% of the shares in A and 100% of the shares in B are owned by X.
- C is a wholly owned direct subsidiary of B.
- A transfers a freehold non-residential property to C for £500,000 (which is equal to the market value of the property).
- Provided that there are no arrangements in place whereby another person can obtain control of C but not A, C may claim group relief so that no SDLT is payable on the transfer to it of the property.
In order to claim Group Relief, C should include code 12 at question 9 in its land transaction return.
Restrictions and Clawback on Group Relief
You should note that there are various restrictions on the availability of Group Relief and we strongly recommend you seek our advice before seeking to rely on the relief.
Group relief may also be “clawed-back” in certain circumstances generally involving the breaking of the group relationship within 3 years of the intra-group transfer. There are detailed anti-avoidance provisions to determine whether or not the SDLT relief would be available or clawed back and again we recommend you seek our advice before seeking to rely on the relief.
Also, as shown in the case of The Tower One St George Wharf Limited v HMRC [2022], Group Relief will not be available if the transaction on which relief is claimed forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of a liability to tax.
We hope this article was interesting and useful to you – please don’t hesitate to contact us if you have any questions regarding the content of the article or your property matters generally. We would be delighted to help.
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