Case Report: Liquidations to Preserve SDLT Group Relief “Not Tax Avoidance”

In HC-One No 1 Ltd v Revenue and Customs Commissioners [2026] UKFTT 678 (TC), the First-Tier Tribunal (“FTT”) held that arrangements for the solvent liquidation of a holding company to preserve SDLT group relief is not tax avoidance (such that SDLT group relief is not precluded). Moreover, the FTT held that SDLT group relief is not reclawed when the acquiring company leaves the group within 3 years due to the solvent liquidation of a holding company, regardless of whether that liquidation was carried out for commercial reasons.

Context

• This case concerns the SDLT consequences of a corporate reorganisation undertaken by the BUPA corporate group (“the Group”) as part of a planned divestment of a large portfolio of care homes.
• Between July and November 2016, 98 properties were transferred inter-group to the appellant, which was a newly incorporated subsidiary of the Group intended to serve as a sale vehicle.
• SDLT group relief was claimed on all these inter-group transfers such that no SDLT was payable at the time.
• On 14 December 2017, the appellant was sold to an unconnected third party, being less than 3 years after the inter-group transfers.
• Immediately prior to the sale, the parent company (“HoldCo”) of the companies which transferred the properties to the appellant was placed into members’ voluntary liquidation.
• HMRC issued discovery assessments and determinations on the basis that:
  1. The inter-group transfers formed part of arrangements of which a main purpose was the avoidance of SDLT, such that the targeted anti-avoidance provision in Para. 2(4A), Sch. 7, FA 2003 applies.
  2. In the alternative, the inter-group transfers, the liquidation, and the subsequent sale constitute “scheme transactions” such that s. 75A, FA 2003 is engaged.
• There were some discussions around the validity of the assessments and the correct method for determining chargeable consideration. However, these issues have not been discussed here as they are not the technically interesting points.

Legislation

SDLT Group Relief

• When land or buildings are transferred between companies who are in the same group, SDLT group relief may be available.
• However, there are various scenarios where group relief is not available in the first place and others where group relief can be reclawed.
• For example, group relief is reclawed if the purchaser ceases to be a member of the same group within 3 years of the transaction and is still holding the asset. (“Para. 3(1)”)
• However, where the purchaser ceases to be a member of the same group by virtue of the vendor (or a holding company of the vendor) being wound up, group relief is not withdrawn. (“Para. 4(4)”)
• As HoldCo was liquidated prior to the sale of the appellant it was clearly the appellant’s plan that group relief should not be withdrawn via Para. 4(4).
• However, HMRC were seeking to argue that group relief is not available in the first place as the transaction forms part of arrangements of which the main (or one of the main) purpose is the avoidance of liability to tax. (“Para. 2(4A)”)

S. 75, FA 2003

• S. 75A, FA 2003 is a wide-reaching portion of SDLT anti-avoidance which does not even require an anti-avoidance motive to apply.
• Essentially, the legislation applies when:
  1. A person (“V”) disposes of a chargeable interest, and another person (“P”) acquires said interest (or an interest deriving from it).
  2. A number of transactions are involved in connection with the disposal and acquisition (“the Scheme Transactions”).
  3. SDLT payable in respect of the Scheme Transactions is less than that which would be payable on a notional transaction transferring the chargeable interest directly to P.
• “Transactions” in this case can included non-land transactions and a transaction which takes place after the acquisition discussed in 1).
• The effect of s. 75A applying is that any Scheme Transactions which are land transactions are disregarded and SDLT is charged on the notional transaction based on any chargeable consideration given for any of the Scheme Transactions.

Discussion

Group Relief

• The first point to check is if group relief is precluded in the first place due to the tax avoidance test in Para. 2(4A).
• However, the FTT held that a winding up of HoldCo to preserve SDLT group relief does not amount to tax avoidance.
• This is pursuant to the ruling in IRC v Willoughby [1997] 1 WLR 1071 which sets out that the distinction between tax avoidance and tax mitigation is that tax avoidance is when a taxpayer reduces its tax liability without incurring the economic consequences Parliament intended to be suffered.
• In this case, HoldCo’s liquidation was completely legal and formally progressed through all relevant clearances, asset distributions, and dissolutions, thereby accepting the economic consequences of liquidation.
• As such, group relief should not be precluded by Para. 2(4A).
  • If we assume group relief was available, the salient question is whether Para. 4(4) can apply due to the liquidation of HoldCo, such that group relief is not withdrawn under Para. 3(1).
  • It was held by the FTT and accepted that the liquidation of HoldCo was undertaken merely to achieve the desirable SDLT outcome.
  • However, the FTT held that Para. 4(4) is not limited to liquidation with a commercial motivation.
  • Indeed, other provisions of adjacent legislation do contain such limitations, making it clear that parliament did not intend for such limitations to be present within Para. 4(4).
  • The FTT stated: “I take the view that, had Parliament appreciated that taxpayers might liquidate a vendor company or a company above the vendor in order to preserve a group relief claim which would otherwise be the subject of a clawback, it may well have drafted the provision differently. However, I do not consider that an interpretation giving rise to a surprising result is, of itself, sufficient to read words into the legislation which are not there and which the context does not require.”

S. 75A, FA 2003

• The FTT noted that s. 75A is a deeming provision and is subject to the limits for which the deeming is required per the ruling in Project Blue Limited v HMRC [2018] UKSC 30 (“Project Blue”).
• The scope of the Scheme Transactions is very broad. However, the FTT noted that the boundary of investigation is not. As articulated in Project Blue, the statutory language requires that such transactions are an integral part or component of the disposal by V and acquisition by P.
• In this case, the appellant is P and the Group companies which transferred the 98 properties to the appellant are V collectively.
• However, the FTT did not agree with HMRC that the sale of the appellant and the liquidation of HoldCo were Scheme Transactions.
• This is because the sale of the appellant was not involved with the transfer of the properties to the appellant and the purposes behind HoldCo’s liquidation was SDLT mitigation and not in facilitating the transfer of the properties.
• As such, the FTT held that s. 75A, FA 2003 did not apply in this case, as there were no Scheme Transactions beyond the transfers directly to the appellant.

Summary

• The FTT has concluded that:
  • Group relief was not precluded under Para. 2(4A) as liquidating HoldCo to mitigate SDLT does not constitute a tax avoidance motive.
  • Group relief is not withdrawn under Para. 3(1) as Para 4(4) does not require that HoldCo’s liquidation be enacted for commercial purposes.
  • S. 75A does not apply as none of the other transactions were an integral part of the transfer from V to P, such that there were no Scheme Transactions beyond the transfers directly to P.
• As such, the appeal was upheld and the taxpayer won.

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