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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs: Group Tax Bulletin article: Definitions

Relief is extended to any “body corporate” through the definition of ‘company’in section 100(1) FA 2003 (see To determine whether an entity qualifies as a body corporate HM Revenue & Customs (HMRC) will follow the guidelines for stamp duty set out at STSM042220. Refer to SDLTM23020.

Meaning of subsidiary

Paragraph 1(2)(b) requires that the companies claiming relief must be 75% subsidiaries of one another or 75% subsidiaries of a third company.

Paragraph 1(3) provides that for a company (A) to be a 75% subsidiary of another company(B) if:

  • company B is the beneficial owner of at least 75% of the ordinary share capital of company A;
  • it is beneficially entitled to not less than 75% of profits available for distribution to equity holders; and
  • it would be entitled to not less than 75% of any assets of A available for distribution to equity holders on winding up.

Paragraph 1(4) provides that ‘ownership’’ for these purposes is either directly or indirectly through another company or group of companies. The rules in section 838(5) to(10) ICTA 1988 apply to determine the amount of ordinary share capital. Paragraph 1(5)defines “ordinary share capital”. Refer to SDLTM23020.

Paragraph 1(6) applies Chapter 6 of Part 5 of the Corporation Tax Act2010 which defines “equity holder”.

The meaning of subsidiary is also relevant to the arrangements test in paragraph 2(2)(b)of Schedule 7

The tests in paragraph 1 of Schedule 7 apply independently of the tests in paragraph 2 and claims are not allowable if these tests are not met.

Paragraph 2 of Schedule 7

Paragraph 2 provides anti-avoidance rules which restrict the availability of group relief. It will prevent relief being allowable in circumstances where certain ‘arrangements’ are in place.

Meaning of arrangements

“Arrangements is defined generally for the purposes of paragraph 2 in paragraph2(5) to include any scheme, arrangement or understanding, whether or not legally enforceable”. This definition is used in section 76(6A)(b) FA 1986 (inserted bysection 112(6) FA 2002 see but”arrangements” was not defined for the equivalent stamp duty provisions insection 42(2) FA 1930 or section 27(2) FA 1967. Under this new definition,”arrangements” will include schemes, arrangements or understandings not inwriting and the existence of arrangements in a particular claim will depend on a consideration of all of the facts relating to the claim and the surrounding circumstances.

In considering whether arrangements exist that might disqualify the claim, HMRC will seek to establish whether there was any scheme, arrangement or understanding.