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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Reliefs: Group, reconstruction or acquisition relief

Restrictions on availability FA03/SCH7/PARA2(4A)

FA03/SCH7/PARA2(4A) introduced new restrictions on the availability of Stamp Duty Land Tax group relief under FA03/SCH7.

The effect is that group relief is not available where a transaction

  • is not effected for bona fide (you may also find it useful to look at Section 75A FA 2003 SDLTM09050, ) commercial reasons, or,
  • forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of tax

‘Tax’ means income tax, capital gains tax, corporation tax, stamp duty or stamp duty land tax.

This guidance gives some examples of transactions where it is accepted that group relief is not denied by FA03/SCH7/PARA2(4A).

It should be noted that the examples are intended only to give general guidance and do not use technical or statutory language, nor should they be interpreted as if they were a statute.

They also assume that the transactions described do not form part of any larger scheme or arrangement which might have tax consequences.

Anyone who wants guidance on a specific transaction is welcome to write to us under the provisions of Code of Practice 10. See SDLTM51000.

Examples of transactions where group relief is not denied by FA03/SCH7/PARA2(4A)

  • The transfer of a property to a group company having in mind the possibility that shares in that company might be sold more than three years after the date of transfer
  • The transfer of a property to a group company having in mind the possibility that shares in that company might be sold within three years of the date of transfer, with a consequent claw-back of group relief, in order that any increase in value of the property after the intra-group transfer might be sheltered from stamp duty land tax
  • The transfer of property to a group company having in mind the possibility that either (1) or (2) might occur
  • The transfer of a property to a group company prior to the sale of shares in the transferor company, in order that the property should not pass to the purchaser of the shares
  • The transfer of property to a group company in order that commercially generated* rental income may be matched with commercially generated losses from a Schedule A business
  • The transfer of property to a group company in order that commercially generated* chargeable gains may be matched with commercially generated allowable losses
  • The transfer of property to a non-resident group company in the knowledge that future appreciation or depreciation in value will be outside the scope of corporation tax on chargeable gains
  • Transactions undertaken as part of a normal commercial securitisation
  • The transfer of the freehold reversion in a property to a group lessee in order to merge the freehold and the lease, and thus prevent the lease being subject to the wasting assets rules as respects corporation tax on chargeable gains
  • The transfer of property to a group company in order that interest payable on borrowings from a commercial lender on ordinary commercial terms may be set against commercially generated* rental income
  • Borrowings on ordinary commercial terms

    • from a commercial lender, or
    • intra-group in circumstances which would have been commercial had they arisen between unconnected third parties

*Including income, gains and losses which are generated intra-group on transactions which would have been commercial had they been entered into by unconnected third parties

‘Transfer’ means the transfer of a freehold, in Scotland ownership of land, or the assignment, in Scotland assignation, of a lease.

Cases involving the grant of a lease will need to be considered on their facts.