CheckLists.Tax (beta)
G11. Intra-group transfer of asset
INCOME TAX
Transfer of assets abroad
- Intra-group transfer of asset to non-resident company by closely held as a relevant transfer
- The TOAA rules apply to a relevant transfer by a closely-held company in which an individual has a qualifying interest (ITA s.720A).
- Only applies to income arising on or after 6 April 2024 (FA 2024, s.22(10)).
- See further i1. Creation and addition to trust.
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
CORPORATION TAX: CHARGEABLE GAINS
STAMP DUTY LAND TAX
Chargeable consideration
- Acquisition by connected company/consideration includes connected company shares: market value consideration
- See K2. Acquisition of land.
- Note, in particular, the point raised as to whether an intra-group transfer at undervalue can fall within the exclusion from the market value rule for distributions
Group relief
- Conditions for relief
General rule
- Transaction is exempt if vendor and purchaser are companies that are members of the same group at the effective date (FA 2003, Sch 7, para 1(1)).
Group (75% subsidiaries)
- Companies are members of the same group if (para 1(2)):
- One is the 75% subsidiary of the other; or
- Both are 75% subsidiaries of a third company.
- 75% subsidiary requires beneficial ownership/entitlement to 75% of (para 1(3)):
(1) ordinary share capital; and
- all issued share capital other than capital with a right solely to dividend at a fixed rate (para 1(5)).
(2) profits available for distribution to equity holders; and
(3) assets available for distribution to equity holders on a winding-up.
- Ownership/entitlement may be direct or indirect (para 1(4)).
- Apply rules in CTA 2010, ss.157 - 182 with certain exclusions (para 1(6) - (6A)).
Claim required
- Group relief must be claimed in the SDLT1 (s.62(3)).
Legislation: FA 2003, s.62; Schedule 7; CTA 2010, ss.157 - 182;
Cases:
HMRC manuals:
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- Exclusion 1: arrangements for person to have control of purchaser but not the vendor
Exclusion of relief
- Group relief not available if there are arrangements by virtue of which a person has or could obtain control of the purchaser but not the vendor (para 2(1)).
- Arrangements must be in existence at effective date of the transaction.
- Applies where a person has or could at some later time obtain control of purchaser but not vendor
- Does not apply of demutualisation relief from stamp duty available.
Exclusion does not apply if stamp duty acquisition relief will apply
- Arrangements do not lead to group relief denial if stamp duty acquisition relief (FA 1986, s.75) will apply and as a result the purchaser will be a member of the same group as the acquiring company (para 2(1)).
Legislation: FA 2003 Schedule 7;
Cases:
HMRC manuals:
Commentary:
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- Exclusion 2: arrangements for vendor and purchaser to cease to be members of the same group
Exclusion of relief
- Group relief is not available if the transaction is part of/connected with arrangements under which (para 2(2)(b)):
- the vendor and purchaser are to cease to be members of the same group.
- by virtue of the purchaser ceasing to be a 75% subsidiary of the vendor or a third company.
- Does not apply of demutualisation relief from stamp duty available.
Legislation: FA 2003 Schedule 7;
Cases:
HMRC manuals:
Commentary:
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- Exclusion 3: consideration to be provided or received (directly or indirectly) by person other than group company
Exclusion of relief
- Group relief is not available if the transaction is part of/connected with arrangements under which the consideration for the transaction (or part of it) is to be (para 2(2)(a)):
(1) provided by a person other than a group company; or
(2) received by a person other than a group company.
- Exclusion applies where consideration is provided/received by third person directly or indirectly.
- Expressly included are arrangements whereby any group company is to
- be enabled to provide any of the consideration; or
- to part with any of the consideration
by or in consequence of any transaction involving a payment or other disposition by a non-group company.
Legislation: FA 2003 Schedule 7;
Cases:
HMRC manuals:
Commentary:
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- Exclusion 4: transaction not for bona fide commercial reasons/part of tax avoidance arrangement
Exclusion of relief
- Group relief is not available if the transaction is (para 2(4A)):
(1) not effect for bona fide commercial reasons; or
(2) part of arrangements with a main purpose of avoiding tax.
- Tax means stamp duty, SDLT, income tax, corporation tax, capital gains tax.
Main purpose of avoiding tax
- See Procedure.tax N2-5a. Purpose tests.
- Test at the time of the transaction (Tower One, UT §67).
- But the purpose can one of seeking to avoid tax in the future (Tower One, UT §§72, 74).
- Where the tax avoidance purpose exists, it is irrelevant whether it is successfully achieved (Tower One, UT §§66, 68).
Examples
- Relief denied in Tower One where T sought to achieve a tax free step up in base cost for corporation tax purposes, even though T later accepted that this had not been achieved (UT decision on this not appealed to CoA).
- Buying shares and than transferring property to purchaser using group relief not SDLT avoidance (even though less tax paid than on direct purchase of property) (Brindleyplace Holdings).
Legislation: FA 2003 Schedule 7;
Cases:
The Tower One St George Wharf Limited v. HMRC [2024] UKUT 373 (TCC), Judge Zaman and Judge Bowler;
Brindleyplace Holdings Sarl v. HMRC [2024] UKFTT 808 (TC), Judge Malek;
HMRC manuals:
Commentary:
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- Group relief and s.75A notional transactions
- Group relief can apply to a notional s.75A transaction.
- However, if the actual transactions had a main tax avoidance purpose that will be attributed to the notional transaction (Tower One CoA, §92).
Legislation:
Cases: The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588;
HMRC manuals:
Commentary:
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- Intra-group transfer of land interest followed by sale of recipient and transfer up of land interest (s.75A tax in excess of market value)
- Tower One illustrates the possibility that an intra-group transfer of an asset followed by a sale of the receiving company and a transfer up of the asset acquired
- On the facts, the fact that the intra-group grant of a lease did not qualify for group relief (see K3. Grant of a lease) meant that tax was due on the market value of the lease (£200m rather than £30m).
- Further, the subsequent transfer of the lease (post a sale of the lessee for £170m) for £30m was liable for SDLT.
- CoA aggregated the chargeable consideration for all scheme transactions (addition of capital, grant of lease, sale of company, transfer of lease) and it, coincidentally, came to slightly more than the £230m on which SDLT should have been paid apart from s.75A.
- This allowed HMRC to claim the whole tax under s.75A (notwithstanding it was unable to collect the tax that would have been payable on the grant of the lease due to group relief not in fact applying).
Legislation:
Cases: The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588;
HMRC manuals:
Commentary:
See also: