LBTT3025 - Group relief

LBTT guidance on tax relief where at the effective date of a land transaction the seller and buyer are both companies in the same group.

This relief is provided by the provisions of schedule 10 to the LBTT(S)A 2013. Additional guidance is also available in relation to group relief, covering:

Description of relief

Subject to certain rules, group relief provides relief from LBTT where, at the effective date, the seller and buyer are both companies in the same group. This allows companies to move property within a corporate group structure for commercial reasons without a liability to LBTT being incurred.

LBTT(S)A 2013 schedule 10 paragraph 2

Group relief reflects the wider principle enshrined in LBTT(S)A 2013 that similar things should be taxed similarly and dissimilar things should not be taxed similarly. Where a property changes hands within a group structure the effective economic interest has not changed hands, therefore LBTT(S)A 2013 does not tax the transaction as if it were a bargain struck between arms-length entities.

If the buyer and seller of a chargeable interest are companies and, at the effective date of the land transaction, they are both members of the same group, relief from LBTT may be claimed by the buyer. The purchasing company may choose to pay the tax by not claiming the relief.

Claiming the relief

To claim this relief see the guidance on 'How to make a LBTT return and pay tax' which is available separately on our website.

For the purposes of this relief:

  • ‘company’ means a body corporate;
  • companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company;

LBTT(S)A 2013 schedule 10 paragraph 43

  • one company (company B) is the 75% subsidiary of another (company A) if the following conditions are met:
    • Company A is beneficial owner of not less than 75% of the ordinary share capital of company B (either directly or through another company or companies determined in accordance with sections 1155 to 1157 of the Corporation Tax Act 2010);
    • Company A is beneficially entitled to not less than 75% of the profits available for distribution to equity holders of company B; and
    • Company A would be beneficially entitled to not less than 75% of any assets of company B available for distribution to its equity holders on a winding-up.

LBTT(S)A 2013 schedule 10 paragraphs 44 and 45

The detailed rules on the qualifying tests in Chapter 6 of Part 5 of the Corporation Tax Act 2010 (group relief: equity holders and profits or assets available for distribution) apply for the purposes of conditions (b) and (c) above. However sections 171(1)(b) and (3), 173, 174 and 176 to 178 of that Chapter are treated as omitted.

LBTT(S)A 2013 schedule 10 paragraphs 47 and 48

‘Ordinary share capital’ means all the issued share capital of the company, by whatever name called, apart from that share capital which only confers rights to a fixed dividend with no other rights to participate in the profits of the company.

LBTT(S)A 2013 schedule 10 paragraph 46

‘Control’ is to be interpreted in accordance with sections 450 and 451 of the Corporation Tax Act 2010.

Restrictions on availability

Group relief is not available to the buyer in three situations:

  • where at the effective date of the transaction there are arrangements in existence which mean that a person (or persons) has or could obtain control of the buyer but not of the seller. It does not matter whether the arrangements are actually used to obtain control.

However this restriction does not apply if:

  • there are arrangements entered into for the purpose of acquiring shares by a company and Stamp Duty acquisition relief under section 75 of the Finance Act 1986 applies and the conditions will be met for a claim to be made, and as a result of the arrangement, the buyer will be a member of the same group as the acquiring company; and
  • there are arrangements, one of the purposes of which is to facilitate the transfer of the whole or part of the business of one company to another, Stamp Duty demutualisation of insurance companies (section 96 of the Finance Act 1997) is intended to apply and the conditions for that relief are intended to be met.

LBTT(S)A 2013 schedule 10 paragraphs 3, 4, 9 and 10

  • where a purpose of the transaction is connected to arrangements under which

    the consideration is provided or received directly or indirectly by a person  other than a group company. (A ‘group company’ is a company that at the effective date of the transaction is a member of the same group as the buyer  and the seller). This also applies when the arrangements mean that part of  the consideration is provided or received as a consequence of the carrying out of a transaction (or transactions) involving a payment (or payments) or receipt (or receipts) by a person other than a group company; and

  • where a purpose of the transaction is connected to arrangements under which the buyer ceases (or could cease) to be in the same group as the seller by virtue of ceasing to be a 75% subsidiary of the seller or third party company. 

    However this rule does not apply if there are arrangements, one of the purposes of which is to facilitate the transfer of the whole or part of the business of one company to another, to which the provisions on Stamp Duty in respect of demutualisation of insurance companies in section 96 of Finance Act 2007 are intended to apply, and the conditions for that relief are intended to be met.

LBTT(S)A 2013 schedule 10 paragraphs 5, 6, 10 and 11

A targeted anti avoidance rule also applies whereby the relief is not available where the transaction is:

  • not effected for bona fide commercial reasons; or
  • forms part of arrangements where the main purpose or one of the main purposes of which is the avoidance of a tax liability.

LBTT(S)A 2013 schedule 10 paragraph 8

Ref ID: 
LBTT3025
Archive Date: 
24 November 2017
Last updated: 
24 November 2017
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