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HMRC internal manual

Stamp Duty Land Tax Manual

Reliefs: Group, reconstruction or acquisition relief

Reconstruction and acquisition relief: Availability of acquisition relief FA03/SCH7/PARA8

On purchasing all or part of the undertaking of another company (the target company) the acquiring company (the company acquiring the target company) may enter into a land transaction as part of, or in connection with, the transfer of the purchased undertaking.

For further guidance on undertakings see SDLTM23201Where all the conditions are met, stamp duty land tax is chargeable in connection with the land transaction so entered into at a rate of 0.5%.

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. These shares must be issued to

    • the target company
    • any or all of 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

* cash which does not exceed 10% of the nominal value of the non-redeemable shares issued for the transaction
* the assumption or discharge, by the acquiring company, of liabilities of the target company
* both of these things
  • the acquiring company is not associated with any other company that is a party to arrangements with the target company relating to the shares issued to the target company as a result of the transfer of the undertaking

The reference to shareholders means that the relief is not available unless the target company has a share capital, or unless the issue of shares is to the target company itself.

It follows therefore that unless the issue of shares is to the target company itself, 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.