SDLT group relief anti-avoidance – good news from HMRC
Last week saw some (much needed) good news on the topic of SDLT avoidance, that should clarify HMRC's approach to the common commercial practice of transferring a property intra-group, following the acquisition of a property-owning company (PropCo).
Following a meeting earlier this summer between HMRC, the British Property Federation, the Law Society and others, HMRC have confirmed that they will not deny SDLT group relief where:
1. A business acquires a PropCo
2. The property is then transferred to another group company (Group Transfer)
3. The purchaser then liquidates PropCo
As a caveat, HMRC stress that any additional steps may result in denial of group relief. As ever, it is therefore important to give early thought to SDLT in planning this type of acquisition.
The trigger for the meeting had been HMRC's invoking of a targeted anti-avoidance rule (TAAR) within the SDLT group relief rules to deny group relief in a number of cases. The TAAR denies group relief on a transaction not carried out for bona fide commercial reasons, or as part of arrangements a main purpose of which is to avoid tax.
HMRC's view had been that a Group Transfer in the circumstances set out above was part of arrangements with a tax avoidance main purpose, as although the business first buys PropCo, the real aim of the business was to acquire the property. Buying the property directly from the PropCo, before it became part of the purchaser's group, would not have been eligible for SDLT group relief.
The meeting notes interestingly draw on draft guidance published alongside the new GAAR (see my blog here) which confirms that HMRC regard a decision to purchase shares rather than land, and therefore pay less tax, as a "straightforward legislative choice".
Along with the welcome clarification on the specific approach to SDLT group relief, it is also good to see taxpayer-friendly HMRC guidance on the GAAR filtering down to other, more targeted, anti-avoidance provisions. Long may that continue!