LBTT3027 - Cases where group relief is not withdrawn

Cases where group relief is not withdrawn: Winding up

Group relief is not withdrawn when the buyer ceases to be a member of the same group as the seller in the course of, or for the purposes of, winding up the seller or another company that is above the seller in the group structure. A company is above the seller in the group structure if the seller (or another company above the seller in the group structure) is a 75% subsidiary of the company.

LBTT(S)A 2013 schedule 10 paragraph 20

LBTT(S)A 2013 schedule 10 paragraph 41

Cases where group relief is not withdrawn: stamp duty reliefs

There are two instances where LBTT group relief is not withdrawn when certain stamp duty reliefs apply.

1. Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because of an acquisition of shares by another company (the acquiring company) in relation to which:

• Section 75 of the Finance Act 1986 (stamp duty: acquisition relief) applies and the conditions for group relief under that section are met; and
• immediately after that acquisition, the buyer is a member of the same group as the acquiring company.

LBTT(S)A 2013 schedule 10 paragraph 21

2. Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because of the transfer of the whole or part of the seller’s business to another company (the acquiring company) in relation to  which:

• Section 96 of the Finance Act 1997 (stamp duty: demutualisation of insurance companies relief) applies and the conditions for group relief under that section are met; and
• immediately after that acquisition, the buyer is a member of the same group as the acquiring company.

LBTT(S)A 2013 schedule 10 paragraph 22

However, in both of these instances, withdrawal of the relief rules will apply if:

• the buyer ceases to be a member of the same group as the acquiring company within three years of the effective date of the transaction or in the pursuance of, or in connection with, arrangements made before the end of a three year period beginning with the effective date of the transaction for which group relief was claimed (the ‘relevant transaction’); and
• at the time the buyer ceases to be a member of the same group as the acquiring company, it or a relevant associated company holds a chargeable interest that was acquired by the buyer under the relevant transaction or is derived from a chargeable interest acquired by the buyer under the relevant transaction and that has not subsequently been acquired at market value under a chargeable interest for which group relief was available but not claimed.

LBTT(S)A 2013 schedule 10 paragraphs 23, 24 and 25

A ‘relevant associated company’, in relation to the buyer, means a company that:

• is a member of the same group as the buyer immediately before the buyer ceases to be a member of the same group as the seller; and
• ceases to be a member of the same group as the seller in consequence of the buyer so ceasing.

LBTT(S)A 2013 schedule 10 paragraph 42

Cases where group relief is not withdrawn: seller leaves the group

Group relief is not withdrawn where the buyer ceases to be a member of the same group as the seller because the seller leaves the group. The seller is regarded as leaving the group if the buyer and seller cease to be members of the same group due to a transaction relating to shares in:

• the seller; or
• another company that is above the seller in the group structure and that, as a result of the transaction, ceases to be a member of the same group as the buyer.

A company is above the seller in the group structure if the seller (or another company above the seller in the group structure) is a 75% subsidiary of the company.

However if there is a change of control of the buyer after the seller leaves the group, group relief is withdrawn as if the buyer had ceased to be a member of the same group as the seller.

This rule does not apply where the change of control of the buyer takes place because a loan creditor (defined by section 453 of the Corporation Tax Act 2010) obtains control of or ceases to control the buyer and the other persons who controlled the buyer before the change continue to do so.

A change in control of the buyer occurs if:

• a person who controls the buyer (alone or with others) ceases to do so;
• a person obtains control of the buyer (alone or with others); or
• the buyer is wound up.

However a person does not control or obtain control of the buyer if that person is under the control of another person or persons.

LBTT(S)A 2013 schedule 10 paragraphs 26 to 31

Withdrawal of relief in certain cases involving successive transactions

Some of the withdrawal provisions previously mentioned were got round by various manoeuvres variously described as ‘bungee’ or ‘drop and bounce’ schemes. Paragraphs 32-40 of schedule 10 to the LBTT(S)A 2013 were introduced as highly technical anti-avoidance provisions to counteract these schemes. We consider that such schemes might now fall to be counteracted under the Scottish GAAR (see RSTP8001).

With this in mind, where the following four conditions are met, the rules about withdrawal of group relief apply to a relevant transaction (i.e. a transaction for which group relief was claimed) as if the seller in relation to the earliest previous transaction was the seller in relation to the relevant transaction:

1. There is a change in control of the buyer. This first condition does not apply where:

• there is a change in the control of the buyer because a loan creditor (within the meaning given by section 453 of the Corporation Tax Act 2010) obtains control of, or ceases to control, the buyer; and
• the other persons who controlled the buyer before the change continue to do so.

LBTT(S)A 2013 schedule 10 paragraphs 32, 33 and 38

2. The change occurs:

• before the end of the period of 3 years beginning with the effective date of the transaction which is exempt from charge by virtue of this schedule (‘the relevant transaction’); or
• in pursuance of, or in connection with, arrangements made before the end of that period.

LBTT(S)A 2013 schedule 10 paragraph 34

3. The relief in relation to the relevant transaction would not be withdrawn on the previous transaction by the buyer ceasing to be a member of the same group  as the seller (see LBTT3026).

LBTT(S)A 2013 schedule 10 paragraph 35

4. In relation to any previous transaction:

• the previous transaction is exempt from charge by virtue of group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031);
• the effective date of the previous transaction is less than three years before the date of the change mentioned in the first condition;
• the chargeable interest acquired under the relevant transaction by the buyer in relation to that transaction is the same as, comprises, forms part of, or is derived from, the chargeable interest acquired under the previous transaction by the buyer in relation to the previous transaction; and
• since the previous transaction, the chargeable interest acquired under that transaction has not been acquired by any person under a transaction that is not exempt from charge by virtue of group relief (see LBTT3025), reconstruction relief (see LBTT3030) or acquisition relief (see LBTT3031).

LBTT(S)A 2013 schedule 10 paragraphs 36 and 37

If two or more transactions effected at the same time are the earliest previous transactions the reference above to the seller in relation to the earliest previous transaction is a reference to the persons who are the sellers in relation to the earliest previous transactions.

LBTT(S)A 2013 schedule 10 paragraph 39

There is a change in the control of a company if:

• a person who controls the company (alone or with others) ceases to do so;
• a person obtains control of the company (alone or with others); or
• the company is wound up.

LBTT(S)A 2013 schedule 10 paragraph 40