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HMRC internal manual

Stamp Duty Land Tax Manual

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

Purchaser ceases to be a member of the same group as the vendor within 3 years change in chargeable interest held

B Ltd is 100% owned by A Ltd. These two companies form a group for the purposes of stamp duty land tax.

A Ltd (the vendor) transfers the freehold interest in a parcel of land to B Ltd (the purchaser) for no consideration on 25/06/04. This is the relevant transaction. The market value of the freehold interest is £1,000,000 on 25/06/04. B Ltd claims group relief in respect of the transfer.

B Ltd grants a lease to an unconnected third party for market value on 19/10/04.

A Ltd sells the shares in B Ltd to an unconnected third party on 07/07/06. The market value of the freehold reversionary interest and right to receive rent is £900,000 on 07/07/06. As a result of this sale of shares, B Ltd leaves the group on 07/07/06.

As the purchaser (B Ltd) left the same group as A Ltd (the vendor) before the end of the period of three years from the date of the relevant transaction (which period would end on 24/06/07), group relief is withdrawn as no exceptions apply.

B Ltd now holds the freehold reversionary interest rather than the freehold which was the subject of the relevant transaction (the transfer of the interest from A to B).

The stamp duty land tax payable is that which would have been payable on the appropriate proportion of the original transaction, taking account of the chargeable interest transferred by the original transaction and the chargeable interest now held.

The market value of the chargeable interest now held has to be ascertained as at the date of the relevant transaction, that is 25/06/04.

If this was £850,000, the stamp duty land tax payable is calculated on the market value of the relevant transaction, that is on the market value of the freehold interest (£1,000,000) and reduced by the appropriate proportion i.e. 850,000/1,000,000.