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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs: Group, reconstruction or acquisition relief

Reconstruction and acquisition relief: Availability of reconstruction relief FA03/SCH7/PARA7

On acquiring all or part of the undertaking that is, part of the business, of another company (the target company), in pursuance of a scheme for the reconstruction of the target company, the acquiring company, that is, the company acquiring the target company, may enter into a land transaction as part of, or in connection with, that scheme. For further guidance on undertakings see SDLTM23201 

Where all the conditions are met, relief from Stamp Duty Land Tax (SDLT) is available.

The conditions are that

  • the consideration for the acquisition consists wholly or partly of the issue of non-redeemable shares in the acquiring company. Non-redeemable shares means shares that are not redeemable
  • the shares must be issued to all the shareholders of the target company

Where the consideration consists partly of the issue of non-redeemable shares, this condition is only fulfilled if all the balance of the consideration consists of the assumption or discharge, by the acquiring company, of liabilities of the target company.

  • after the acquisition has been made

    • the shareholders of the acquiring company are all shareholders of the target company and the shareholders of the target company are all shareholders of the acquiring company
    • for each shareholder, the proportion of shares held in one company is the same (or as nearly as may be the same) as the proportion of shares held in the other company

The only time the proportions do not have to match exactly is when there are insufficient shares of one company to allow the shareholders to match their proportions of shares in the other company. In this case, any reasonable disposition of the shares to allow matching as nearly as possible is acceptable (but so that control of one company is the same as control of the other company).

  • the acquisition is for bona fide commercial reasons (you may also find it useful to look at Section 75A FA 2003 SDLTM09050) and is not part of a scheme or arrangement where the main purpose, or one of the main purposes, is the avoidance of liability to tax.

Tax here means stamp duty, SDLT, income tax, corporation tax, or capital gains tax

The reference to shareholders means that the relief is not available unless the target company has a share capital.

It follows therefore that the relief is not available, for example, where the target company is a company limited by guarantee, not having a share capital, or an unincorporated association.