Key facts
- Group relief exempts SDLT on transfers between companies in the same 75% group.
- The transferor and transferee must be in a parent–subsidiary relationship (direct or indirect) with 75% ownership.
- The relief can be clawed back if the group relationship breaks within 3 years.
- Relief is not available where the transaction is part of an arrangement to transfer the property to a non-group member.
- Reconstruction and acquisition reliefs provide similar benefits for company reorganisations.
Overview of Group Relief
Group relief under Schedule 7 of the Finance Act 2003 allows companies in the same corporate group to transfer property without SDLT being charged. This facilitates internal restructuring without a tax cost on property movements within the group.[1]
Conditions for Group Relief
Group relief is available when:[2]
- Both the transferor (seller) and transferee (buyer) are companies
- They are members of the same 75% group at the effective date of the transaction
- The transaction is not part of arrangements for the property to be transferred to a non-group member
The 75% Group Test
Two companies are in a 75% group if one is a 75% subsidiary of the other, or both are 75% subsidiaries of a third company. To be a 75% subsidiary:[3]
- The parent must hold at least 75% of the ordinary share capital
- The parent must be beneficially entitled to at least 75% of the profits available for distribution
- The parent must be beneficially entitled to at least 75% of the assets on a winding-up
- The parent must hold an effective 75% interest (considering indirect holdings through chains of subsidiaries)
Example: Company A owns 100% of Company B, which owns 80% of Company C. Company A’s effective interest in Company C is 80% (100% × 80%), so A and C are in a 75% group. If B instead owned 70% of C, A’s effective interest would be 70% and they would not be in a 75% group.
Anti-Avoidance and Restrictions
Group relief is not available if the transaction is part of arrangements under which:[2]
- The property is to be transferred by the transferee to a non-group member
- The transferor and transferee cease to be in the same group in consequence of the arrangements
- The arrangements include the transfer of shares in the transferee company to a non-group person
These restrictions prevent the use of group relief as a step in transferring property to an unrelated third party.
Clawback of Relief
If group relief is claimed and the transferee company leaves the group within 3 years while still holding the property, the relief is withdrawn and the SDLT that would have been payable becomes due:[2]
- The clawback is triggered by the transferee ceasing to be a member of the same group as the transferor
- This commonly occurs when shares in the transferee company are sold to a third party
- The SDLT is calculated as if the relief had never been claimed
- Interest runs from the date of the original transaction
There is no clawback if both the transferor and transferee leave the group at the same time as part of the same event (e.g. a group demerger where both companies move together).
Reconstruction and Acquisition Reliefs
In addition to group relief, two related reliefs exist for corporate reorganisations:[1]
| Relief | When It Applies |
|---|---|
| Reconstruction relief | Transfer of a business (including property) to a new company as part of a scheme of reconstruction, where the old company’s shareholders become shareholders of the new company |
| Acquisition relief | Transfer of a business to a company in exchange for the issue of non-redeemable shares, where the acquiring company obtains control |
Both reliefs are also subject to clawback provisions if certain events occur within 3 years.
Tip: Group relief claims should be made with careful consideration of the 3-year clawback period. If there is any possibility that the transferee company will leave the group within 3 years (e.g. a planned sale of a subsidiary), the SDLT cost should be factored into the commercial analysis.
Frequently Asked Questions
What is a 75% group for SDLT purposes?
Two companies are in a 75% group if one is a 75% subsidiary of the other, or both are 75% subsidiaries of a third company. “75% subsidiary” means the parent owns (directly or indirectly) at least 75% of the ordinary share capital and is beneficially entitled to at least 75% of the profits and assets.
When is group relief clawed back?
Group relief is withdrawn if, within 3 years of the transaction, the transferee company leaves the group while still holding the property (or a derived interest). “Leaving the group” includes a sale of shares in the transferee company.
Does group relief apply to residential property?
Yes. Group relief applies to both residential and commercial property. However, if the higher-rate surcharge would otherwise apply (which it does for all company purchases of residential property), the group relief exempts the surcharge as well.
What is reconstruction relief?
Reconstruction relief applies where a company’s business (including property) is transferred to a new company as part of a scheme of reconstruction. The shareholders of the old company must become shareholders of the new company with substantially the same rights.
Further Reading
- Charity Relief — SDLT relief for qualifying charities
- Compulsory Purchase & Other Exemptions — additional exemptions
- Partnerships & SDLT — special rules for partnership property transfers
- Commercial SDLT Rates — rates that apply where group relief is unavailable
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Sources
- SDLT group relief, reconstruction relief and acquisition relief — GOV.UK
- SDLTM23000 – Reliefs: group relief — HMRC
- Finance Act 2003, Schedule 7 — legislation.gov.uk