SDLTM09410 | Example 4 – Hive-out and sale of transferor

(This example was introduced on 14 May 2021)

Yellow Acorn Limited wishes to purchase all of the shares in Gold Nutmeg Limited, which holds a portfolio of 15 properties. However, Yellow Acorn Limited is not interested in the whole portfolio of properties that Gold Nutmeg Limited holds and only wants to purchase the company holding 5 specific properties.

Gold Nutmeg Limited distributes the properties that Yellow Acorn Limited does not want to its parent company. Once done, Yellow Acorn Limited purchases all of the shares in Gold Nutmeg Limited and pays Stamp Duty on acquiring those shares.

Looking at these facts only, Section 75A does not apply to the distribution. The legislation applies where one person, V, disposes of a chargeable interest and another person, P, acquires either it or a chargeable interest deriving from it. In this example, the only chargeable interests being acquired are the 10 properties Gold Nutmeg Limited distributes to its parent.

The later share purchase by Yellow Acorn Limited of all the shares in Gold Nutmeg Limited is not ‘involved in connection with’ the disposal and acquisition of the other 10 properties as it has no impact on those land transactions. Consequently, there are not a number of scheme transactions under s75A(1)(b).

The same principles above should also apply if the transfer of the properties out of Gold Nutmeg Limited to its parent was for consideration, but group relief was claimed on the transfer under Schedule 7.