On Budget day 2026, with no change to SDLT rates, the one stamp duty measure with teeth for corporate groups was a low-key change to the winding-up exception to the group relief clawback, which is effective from 29 October 2026. This piece is written for those who need to know whether the change catches a deal they are working on and who may want counsel’s opinion about whether SDLT group relief clawback can apply as a result of the group relief change.
How does SDLT group relief work, and when is it clawed back?
Under paragraph 1, Schedule 7, FA 2003, transfers between companies that are members of the same group are exempt from SDLT. 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.
Under paragraph 3, Schedule 7, FA 2003 the group relief exemption will be withdrawn and tax charged if the purchasing company leaves the group within three years of the effective date of the transaction while holding the property. The tax charged will be based on the market value of the property in question at the time of the original transaction.
What was the winding-up exception?
Under paragraph 4(4), Schedule 7, FA 2003 there was no withdrawal of group relief where the purchaser left the same group as the vendor because of anything done for the purposes of, or in the course of, winding up the vendor or a company above it in the group structure. See HMRC manual SDLTM23080.
What did HC-One decide?
The reason for the change to the group relief claw-back is HMRC’s defeat in HC-One No.1 Ltd v HMRC [2026] UKFTT 678. In this appeal, arrangements were made by a large healthcare group to dispose of a part of its care home business. The properties to be sold had been held in various subsidiaries and the properties were transferred to the taxpayer company which was created to act as the sale vehicle and the taxpayer company was then sold with the properties inside it. SDLT group relief was claimed on the transfers of the properties to the taxpayer company. The sale of the taxpayer company then took place within three years ofthe intra-group transfers, but in order to avoid a claw-back of the group relief, the parent company of the property transferring subsidiaries was placed into members’ voluntary liquidation just before the sale of the taxpayer company. This meant that these subsidiaries thereby ceased to be member of the same SDLT group as the taxpayer company because they left the group.
There was therefore no withdrawal of the group relief at that point because the taxpayercompany had ceased to be a member of the transferring subsidiaries’ group because of “the winding up the vendor or a company above it in the group structure.” The taxpayer company was then free to leave the remaining group without a clawback. The purpose of this arrangement was to rely on paragraph 4(4), Schedule 7, FA 2003 in order to avoid the claw-back on transferee companies leaving the group after benefitting from the group relief exemption.
The FTT held that even though the voluntary liquidation was intended to prevent an SDLT claw-back charge arising, this did not engage the anti-avoidance provisions in paragraph 2(4A), Schedule 7 FA 2003 nor was section 75A FA 2003 engaged. The taxpayer had been created in order to combine the healthcare group’s care home businesses into one holdingvehicle for a sale.
The FTT decided that voluntary liquidation and de-grouping was not “tax avoidance” but a legitimate tax planning choice that was permitted by the clear language of the statute. In relation to section 75A FA 2003, the FTT decided that the voluntary liquidation of the company above the vendor companies followed by the sale of the taxpayer company were not “scheme transactions” in connection with the initial intra-group transfers of the properties to the taxpayer company in order to prepare the businesses for sale.
It is understood that HMRC are appealing this decision under Upper Tribunal reference UT-2026-000087. One ground of appeal may be that upon entering voluntary liquidation the parent company’s beneficial ownership of the transferring subsidiaries vested elsewhere in the group so that those subsidiaries did not actually leave the group leaving the clawback potential in place for when the taxpayer company was then sold out of the group.
What exactly changed from 29 October 2026?
The winding-up exception has moved from paragraph 4(4) into paragraph 4ZA and becomes subject to its change of control test. Where the exception applies but there is a change in control of the purchasing company within three years of the effective date of the transaction that was exempt using group relief, that relief is withdrawn. The draft legislation effecting this change can be found here.
Does the change catch intra-group transfers made before 29 October?
The change does not apply to land transactions with an effective date on or after 29 October 2026 where the contract for that land transaction was entered into before that date, unless:
• the contract is varied or rights under the contract are assigned on or after 29 October 2026;
• the transaction is carried out on or after 29 October 2026, in exercise of an option, right of pre-emption or a similar right; or
• on or after 29 October 2026, there is an assignment, subsale or other transaction that relates to all or part of the subject matter of the contract, which results in someone else other than the original purchaser becoming entitled to call for a conveyance.
What counts as a change of control of the purchaser?
There is a change in the control of the purchaser if—
(a) a person who controls the purchaser (alone or with others) ceases to do so,
(b) a person obtains control of the purchaser (alone or with others), or
(c) the purchaser is wound up.
For this purpose a person does not control, or obtain control of, the purchaser if that person is under the control of another person or other persons and “control” is to be interpreted in accordance with sections 450 and 451 of the Corporation Tax Act 2010.
In summary, a liquidation still safe if the purchasing company stays put and is not sold.
What should advisers check on deals now?
Advisers should check for any group relief claims in the target company in the last three years, check effective dates either side of 29 October 2026, look at the timing of exit, and the share purchase agreement protections a buyer will want, such as warranties and tax indemnities. See further Stamp Duty on Commercial Property
Who pays if relief is withdrawn?
The purchasing company is liable and if it doesn’t pay, HMRC can recover from other group companies and controlling directors.
Does this measure apply in Scotland and Wales?
No: the measure covers property in England and Northern Ireland only. Land and Buildings Transaction Tax and Land Transaction Tax have their own group relief rules.
This is a narrow change, but it closes the route the tribunal opened in
HC-One, and it is already in effect, so anyone selling a company that purchased a property with the benefit of group relief in the last three years should check the history before agreeing the deal structure.
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.
