We are increasingly seeing our corporate clients engage in restructuring of their group structures, for tax or other purposes. This can involve ‘hive ups’ or ‘hive downs’, i.e. transferring property assets into one particular company, with a view to disposing of that company by way of a share sale.
Normally, transfers of property between companies are subject to Stamp Duty Land Tax (SDLT). However, group relief may be available where land and buildings are transferred within a group of companies. This relief allows property to be moved between companies within the same group for good commercial grounds.
If the buyer and seller are companies and on completion of the transaction, the ‘effective date’, they are both members of the same group, the buyer can normally claim SDLT group relief. The buyer can still pay SDLT if it wishes to do so, by simply not claiming the group relief.
It is important to note that some conditions apply as follows:
• There is no group relief where there are arrangements in place to transfer control of the buyer but not the seller. The arrangements must be such that a person or persons could obtain control of the buyer on or after the effective date of the transaction. For example, if on the effective date, the seller enters into a contract to sell its shares in the buyer (assuming that the seller had been the 100% owner of the shares in the buyer) to a third party, group relief would then not be available to the buyer, because the arrangement would mean that the third party would obtain control of the buyer, but not of the seller. The buyer would therefore have to pay SDLT and make a Land Transaction Return.
• Group relief is not available if a non-group company, or person, provides or receives all or part of the consideration for the transaction and this is done in pursuance of an arrangement.
• Group relief is not available where the buyer ceases (or could cease) to be in the same group as the seller. This applies where the arrangements act so that the buyer ceases (or could cease) to be a 75% subsidiary of the seller or third party company and so ceases to be in the same group as
the seller.
• It is also important to note that there are ‘claw back’ provisions where the group relief can be withdrawn. This withdrawal of the relief must be reported by the buyer on a new SDLT return. For example, a new return must be submitted if the buyer ceases to be a member of the same company group as the seller a) before the end of three years beginning with the effective date and b) in pursuance of or in connection with arrangements made before the end of the three-year period beginning with the effective date of the land transaction.
There are a number of other reliefs available to soften the impact of SDLT. We would be happy to advise on whether or not group relief, or any of the reliefs are available to you, and to assist you in preparation of the
SDLT return.
It is essential that you seek professional advice before taking any steps. This note is for information only and does not constitute legal advice. Please contact Tom Lumsden, who is a partner in our Commercial Property department, for further guidance on tel: 01892 515022.
