Can You Transfer Property Between Group Companies Without Paying SDLT?

Moving a property from one company to another can create a potentially substantial Stamp Duty Land Tax liability.

However, where the companies are members of the same qualifying corporate group, SDLT group relief may be available.

If the conditions are satisfied and the relief is properly claimed, a property can potentially be transferred between group companies without an SDLT charge.

But the word “group” has a very specific meaning for these purposes.

Simply owning two companies personally does not necessarily make them a group.

This article deals with Stamp Duty Land Tax, which applies to land transactions in England and Northern Ireland. Scotland and Wales have separate land transaction taxes.

What Is SDLT Group Relief?

SDLT group relief is designed to allow land and buildings to be moved between companies within the same corporate group without triggering an SDLT charge, provided the relevant conditions are met.

HMRC confirms that where the seller and purchaser are both companies and are members of the same qualifying group at the effective date of the transaction, the purchaser can claim group relief. GOV.UK

This can be extremely valuable where, for example, a group wants to:

• move an investment property into a separate property company
• reorganise its property portfolio
• separate trading activities from property ownership
• restructure the group for commercial reasons

But the companies must genuinely satisfy the statutory group conditions.

What Counts as a Group for SDLT?

Broadly, companies are part of the same SDLT group where:

one company is a 75% subsidiary of the other

or

both companies are 75% subsidiaries of another company.

The test goes further than simply looking at the percentage of shares owned.

For one company to qualify as a 75% subsidiary, the parent must generally be beneficially entitled to at least:

• 75% of the ordinary share capital
• 75% of the profits available for distribution
• 75% of the assets available to equity holders on a winding up. GOV.UK

So you need to look at the actual ownership structure and rights attaching to the shares.

Two Companies Owned by the Same Person Are Not Necessarily a Group

This is a particularly important point.

Suppose an individual owns:

100% of Company A

and

100% of Company B

At first sight, you might think those companies are part of the same group.

But for SDLT group relief, they are not simply grouped together because the same individual owns both.

There is no corporate parent above them.

You effectively have two sister companies held personally by the same shareholder.

For SDLT group relief to apply, you would normally need a qualifying corporate structure — for example:

Holding Company

↓
Company A

↓ or alongside

Company B

with the required 75% ownership conditions satisfied.

That distinction can make an enormous difference where valuable property is being moved.

Could You Put a Holding Company Above the Two Companies?

Potentially.

For example, instead of an individual owning two companies directly:

Individual → Company A

Individual → Company B

you could potentially restructure the ownership so that:

Individual → Holding Company → Company A and Company B

If the holding company owns the required interests in both subsidiaries, the companies may then be members of the same SDLT group.

A subsequent property transfer between the subsidiaries could potentially qualify for group relief, subject to all the relevant conditions.

But this is where the planning becomes more complicated.

You cannot simply insert a holding company without considering the tax consequences of doing so.

Creating the Group Is a Separate Transaction

To put a holding company over existing personally owned companies, the shareholder would normally need to transfer their shares in those companies to the new holding company.

That potentially raises separate questions around:

• Capital Gains Tax
• Stamp Duty on the shares
• Share-for-share exchange relief
• HMRC clearances
• Company law
• The commercial rationale for the restructuring

There may be reliefs available to make a genuine corporate reorganisation tax efficient, but the structure needs to be planned properly.

The fact that the ultimate objective is to move a property without SDLT does not mean you should simply set up a holding company and transfer everything without considering the other taxes.

How Is Group Relief Claimed?

Group relief isn’t simply automatic because the companies happen to qualify.

It needs to be claimed on the SDLT return.

HMRC currently requires the purchaser to claim group relief using relief code 12 on the SDLT1 return or electronic equivalent. GOV.UK

So even where no SDLT is ultimately payable because of group relief, the transaction still needs to be dealt with correctly.

It is effectively a self-assessed relief.

The companies and their advisers therefore need to be comfortable that the conditions are satisfied before making the claim.

Watch the Anti-Avoidance Rules

There are restrictions designed to prevent companies being temporarily placed into a group simply to move property tax-free before being moved back out again.

For example, group relief can be denied where arrangements already exist for the purchasing company to cease being a member of the same group. GOV.UK

This is why it is important to look at the entire transaction rather than just the position on the day the property is transferred.

HMRC can consider the surrounding arrangements and not simply the legal structure at one particular moment.

The Three-Year Clawback

Even where group relief is valid when the property is transferred, it can subsequently be withdrawn.

Broadly, if the company that acquired the property leaves the relevant group within three years of the property transfer, the group relief may be clawed back.

The rules can also apply where arrangements for leaving the group were put in place during that three-year period even if the company actually leaves later. GOV.UK

There are exceptions and detailed rules, but it means the future plans for the group matter.

For example, if you transfer a valuable property into a subsidiary using group relief and then sell that subsidiary shortly afterwards, you need to consider whether the original SDLT relief will be withdrawn.

Why Might a Business Want to Move Property Between Companies?

There can be perfectly legitimate commercial reasons.

For example, a business may want to separate:

Trading operations

from

Property assets

A group might want one subsidiary to own the trading business and another to own the premises.

That can make sense for risk management, future investment, financing or succession planning.

Equally, a group that owns several properties might want to reorganise which companies hold particular assets.

That is precisely why group relief exists — to allow qualifying corporate groups to reorganise property ownership without SDLT necessarily becoming an obstacle. HMRC describes the relief as allowing groups to move property for commercial reasons without an SDLT charge, subject to the conditions. GOV.UK

SDLT Isn’t the Only Tax to Consider

This is particularly important.

Avoiding an SDLT charge does not necessarily mean the overall transaction is tax neutral.

A property transfer or corporate restructuring might also raise questions concerning:

• Corporation Tax on chargeable gains
• VAT
• Capital allowances
• Stamp Duty on shares
• Financing and mortgage arrangements
• Company law
• Accounting treatment

If the property is financed, you may also need the lender’s agreement before transferring it.

So these transactions should be looked at as a whole rather than simply asking:

“Can we avoid SDLT?”

The better question is:

“What is the most appropriate way to restructure this property, and what are all the tax consequences?”

Plan Before Moving the Property

This is one of those areas where planning before the transaction takes place is essential.

Once the property has already been transferred, your options can be very limited.

Before proceeding, I would establish:

1. Who currently owns the companies?
2. Are they already members of a qualifying SDLT group?
3. If not, would a corporate reorganisation be commercially appropriate?
4. What are the tax consequences of creating that structure?
5. Does the property transfer qualify for group relief?
6. Are there any arrangements that could prevent relief?
7. Is there any likelihood that one of the relevant companies will leave the group within three years?

Only after working through those questions would I proceed with the transfer.

The Bottom Line

Property transfers between companies in the same qualifying group can potentially be made without an SDLT charge by claiming group relief.

Broadly, the companies need to satisfy the 75% group relationship: one must be a qualifying 75% subsidiary of the other, or both must be qualifying 75% subsidiaries of another company. GOV.UK

But two companies owned personally by the same individual are not automatically a group for these purposes.

It may be possible to create a group structure by introducing a holding company, but that restructuring has its own tax and legal consequences and needs to be considered before anything is transferred.

And remember: group relief must be claimed, and it can potentially be clawed back if the purchasing company subsequently leaves the group. GOV.UK

So if you’re considering moving property from one company to another, get the structure right before transferring the property.

This article provides general information only. SDLT group relief and corporate reorganisations involve detailed conditions and anti-avoidance provisions, so specific tax and legal advice should be taken before implementing a transaction.