The market value rule — Finance Act 2003 section 53
Where a land transaction is between connected persons and the consideration is less than the market value, SDLT is charged on market value (FA 2003 s.53). Connected persons include spouses; parents and children; siblings; companies under common control; a landlord and their own property company. A gift of a £350,000 property from parent to adult child is subject to SDLT on £350,000 even though no consideration passes — plus the 3% surcharge if the child already owns property. SDLT returns must state the market value and be filed within 14 days.
- FA 2003 s.53: SDLT charged on higher of actual consideration or market value in connected-party transactions
- Connected persons: spouses; parents and children; siblings; companies under 50%+ common control (CTA 2010 s.1122; ITA 2007 s.993)
- Gift to adult child: SDLT on market value; 3% surcharge if child already owns property; CGT charge on the parent on any gain
- SDLT return within 14 days: even a nil-SDLT connected-party transaction must be reported; automatic penalties for late filing
Spousal and civil partner transfers
A genuine gift between spouses or civil partners living together is exempt from SDLT (FA 2003 Sch.3 para.3A) where there is no outstanding mortgage. If the receiving spouse assumes a mortgage, the outstanding mortgage balance is chargeable consideration and SDLT is due — including the 3% surcharge where the receiving spouse already owns other property. Transfers between spouses under a court order on divorce are exempt from SDLT on all consideration (FA 2003 Sch.3 para.3). Unmarried cohabitants are not connected under the statutory definition — a gift between cohabitants is not caught by FA 2003 s.53.
SDLT group relief and intra-group transfers
FA 2003 Sch.7 Part 1 provides 0% SDLT on transfers between companies in the same SDLT group (75% common economic ownership and control). This is one of the most valuable reliefs for corporate landlords restructuring between holding companies and SPVs. The relief is clawed back if the transferee company leaves the group within 3 years of the transfer. Intra-group anti-avoidance provisions (Sch.7 para.2(2)) deny the relief where the transaction is part of arrangements whose main purpose is to obtain the relief — document the commercial rationale for any intra-group restructuring.