Moving a property between your own companies: the relief, and the three year clock it starts
Transfer a property from one group company to another and stamp duty land tax normally falls away entirely. What is easy to miss is that the exemption stays provisional for three years. Sell the shares in the company that received the property inside that window and the tax it never paid becomes payable, computed on the value at the date of the transfer and at the rates in force then. The further return is due in 30 days, not 14, and it takes the form of a letter rather than a form.
A full exemption, on a test narrower than it looks
Schedule 7 to the Finance Act 2003 takes a land transaction out of charge altogether where the seller and the buyer are companies in the same group at the effective date. Not a reduced rate, not a deferral: no tax. That is why a hive-down, a move of a trading property into a separate property company, or a reorganisation under a new holding company is normally carried out without a cheque to HMRC. Group membership is tested only at the effective date, which is normally completion, or substantial performance if that comes first, so what the structure looked like a month earlier is beside the point. The bigger surprise is that the 75 per cent test is not a shareholding test. Paragraph 1(3) sets out three limbs and all three must be satisfied. The parent must beneficially own at least 75 per cent of the subsidiary's ordinary share capital. It must be beneficially entitled to at least 75 per cent of any profits available for distribution to equity holders. And it must be beneficially entitled to at least 75 per cent of any assets available to equity holders on a winding up. The second and third are worked out under Chapter 6 of Part 5 of the Corporation Tax Act 2010, with a list of that Chapter's sections treated as omitted by paragraph 1(6A). Preference shares, a shareholder loan that is not a normal commercial loan, and a ratchet in a shareholders' agreement can each break the second or third limb while the share register still reads one hundred per cent. Indirect holdings are multiplied down the chain under sections 1155 to 1157, and grouping is tested pair by pair. If A owns 75 per cent of B and B owns 75 per cent of C, then A and B are grouped, B and C are grouped, and A and C are not.
Arrangements at the outset deny the relief; a later exit takes it back
There are two quite different ways this goes wrong and confusing them is expensive. Paragraph 2 withholds the relief at the outset. Where arrangements exist under which somebody outside the group could obtain control of the buying company, or under which the interest is to pass to a third party, the relief is simply not available, and most of those restrictions are objective: they ask what the arrangements could produce, not why anyone entered into them. HMRC illustrates the point in its manual with a case where arrangements for a share sale already existed when the property moved, and the buying company had to pay the tax and file a return in the ordinary way. That is a return that was wrong when it was made, not a clawback, and the penalty position is correspondingly worse. Paragraph 3 is the other route. It withdraws relief that was properly due if the buying company ceases to be a member of the same group as the selling company within three years beginning with the effective date, and at that moment the buyer, or a relevant associated company, still holds the chargeable interest or an interest derived from it. Beginning with means the effective date is day one: HMRC's own example takes a transfer on 25 June 2004 and gives a period ending on 24 June 2007. The trigger is the buyer leaving the same group as the seller, not the property leaving the group. Sell the property itself to an outsider and the holding test fails, so there is nothing left to claw back. Sell the shares in the company that owns it and there is. Nor is there a long stop. Paragraph 3(1)(a)(ii) reaches a departure after the three years if it happens in pursuance of, or in connection with, arrangements made before the three years ended, and arrangements includes any scheme, agreement or understanding, whether or not legally enforceable. HMRC has published nothing on how it approaches a sale falling shortly after the third anniversary, so there is no safe harbour to lean on there.
An illustrative example, and the number that surprises people
The figures that follow are illustrative and do not come from any client matter. A parent company transfers a warehouse to its wholly owned subsidiary on 1 September 2024 for no consideration. Market value that day is GBP 3,000,000. The subsidiary claims group relief on its return and pays nothing. On 1 March 2026 the parent sells the whole of the subsidiary to an unconnected buyer, and the subsidiary still owns the warehouse, worth GBP 4,200,000 by then. The three year period runs to 31 August 2027, so the relief is withdrawn in full. The charge is computed on the market value at the original effective date, at the non-residential rates in force on that date, which produces GBP 139,500: nothing on the first GBP 150,000, GBP 2,000 on the slice to GBP 250,000, and 5 per cent of the remaining GBP 2,750,000. It is payable with a further return by 31 March 2026. The GBP 4,200,000 plays no part in the arithmetic. HMRC makes the same point in one of its own examples, on a property that had risen to GBP 1,750,000 by the date of the share sale, saying in terms that no account is taken of the increase in value. That works in one direction only. Paragraph 3(2) fixes the charge on the value at the original effective date whether the property has risen or fallen since, so on a falling market the clawback is computed on the higher, earlier figure and the company pays more than the property is then worth would suggest.
Residential property claws back at rates most people do not expect
A company is not charged on the ordinary residential scale. Where a company buys a dwelling for GBP 40,000 or more, and that dwelling is either not subject to a lease or is subject to one with no more than 21 years left to run, the higher rates for additional dwellings in Schedule 4ZA apply. The second limb matters a great deal here, because a freehold reversion subject to a longer lease is among the commonest interests a group moves between its own companies, and it falls outside those rates entirely. Where more than GBP 500,000 is attributable to a single dwelling and no Schedule 4A relief is in point, Schedule 4A charges the whole consideration at a flat 17 per cent. Put a house worth GBP 900,000 through an intra-group transfer with an effective date of 1 September 2025 and that flat charge produces GBP 153,000. The ordinary residential rates on the same figure produce GBP 35,000. Budget the clawback off the ordinary table and you understate it by GBP 118,000. Where a Schedule 4A relief is available, because the dwelling sits in a genuine property rental business run on a commercial basis for instance, the flat charge gives way to the higher rates instead, which on GBP 900,000 come to GBP 80,000. Even then the group is not finished with the question, because Schedule 4A reliefs carry their own three year withdrawal machinery on a separate clock and with a separate return, so the same transfer can be exposed twice over. Since a clawback applies the rates in force at the original effective date, the year of the transfer decides the figure: the flat charge was 15 per cent for effective dates before 31 October 2024, and the additional dwellings surcharge was three percentage points rather than five. A non-resident purchaser adds two points on top. Running the other way, section 116(7) still treats six or more dwellings acquired in a single transaction as non-residential, which on a portfolio is often the cheapest answer available. Test that at the original effective date rather than today's, because multiple dwellings relief was abolished only for transactions completed or substantially performed on or after 1 June 2024, and a transfer with an earlier effective date can still sit inside its three year window until 31 May 2027.
Where the relief survives, and where people assume wrongly that it does
If the property was sold outside the group before the degrouping, the holding test is not met and no charge arises. If the interest was later reacquired at market value under a chargeable transaction on which group relief was available but was not claimed, so that tax was actually paid, paragraph 3 contains an express proviso and again there is no charge. If seller and buyer leave the group together, because an intermediate holding company owning both is sold, the buyer has not ceased to be in the same group as the seller and paragraph 3 is not triggered at all, although paragraph 4A may reach a sequence designed to produce that result. And if it is the seller that leaves, paragraph 4ZA protects the position. That last one is only half the story. Paragraph 4ZA(4) revives the charge on a later change of control of the buyer, and a change of control for that purpose expressly includes the buyer being wound up. So liquidating the company that gave the property away falls within the second case in paragraph 4(4), while liquidating the company that received it does not. That contrast has been tested in the First-tier Tribunal and the reasoning there was helpful to the taxpayer, but a First-tier decision binds nobody and an appeal would be no surprise, so treat it as an indication rather than a settled question and record that caveat in writing before building a liquidation step on it. Two smaller points on the same schedule. The surviving text of paragraph 4 begins at the second case, the original first case having been repealed in 2008, so any account that lists a first case is working from a superseded text. And control does not mean the same thing throughout Schedule 7: paragraph 2 uses section 1124 of the Corporation Tax Act 2010, while paragraphs 4ZA, 4A and 5 use sections 450 and 451. HMRC's own manual page on this still cites a section of the Taxes Act 1988 that was repealed years ago, so do not take the citation from the manual.
The filing is a letter, the deadline is thirty days, and the liability can follow people
This is where published commentary is most often wrong, and the error costs interest and penalties. The Finance Act 2019 cut the ordinary land transaction return period from 30 days to 14, and a great deal of writing has carried that figure across to every stamp duty land tax deadline since. It does not apply here. Section 81 requires a further return within 30 days of the disqualifying event, and Parliament left every further return period at 30 days when it shortened the first returns. Payment is due by the same filing date, and interest runs from the end of that period. The further return is not an amendment of the original one either. The original return was correct when it was made, so there is nothing to amend, and the amendment window closes twelve months after the original filing date in any event. What HMRC requires is a letter to its Stamp Taxes office quoting the unique transaction reference number of the original return, with a self-assessment of the tax now due. The liability does not stop at the company. Where the amount has been finally determined and is still unpaid six months after it became payable, HMRC may serve notice on the seller, on any company that at a relevant time stood above the buyer in the group structure, or on a person who at a relevant time was a controlling director of the buyer or of a company controlling it. That notice must be served within three years of the final determination and requires payment within 30 days of service. Anything paid under it is recoverable from the buyer, but it is not deductible for any tax purpose. All of which argues for doing a small piece of work at the time of the transfer rather than years afterwards. Record that all three limbs of the 75 per cent test were satisfied, that no arrangements existed at the effective date, and what a clawback would cost on that day's value at that day's rates. The first two answer a purchaser's solicitor in due diligence. The third belongs in the price if the company is ever sold. Schedule 7 itself was not touched by the Finance Act 2024, 2025 or 2026, and nothing announced would change the relief or the three year rule. What keeps moving is the rates a clawback is computed at, which is exactly why the year of the original transfer is the first thing to establish.
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This article is general information only and does not constitute tax advice. Figures and dates are current as at the date of writing; any worked example is illustrative. Always consult a qualified adviser before acting.