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SDLTM24765 | Withdrawal of Relief: Portfolio Test Not Met

From HM Revenue & Customs · Stamp Duty Land Tax Manual

Relief for a transaction may be withdrawn where a scheme fails to meet the ‘portfolio test’.

The Portfolio Tests

There are two tests that need to be considered, the residential portfolio test and the non-residential portfolio test.

1. Residential Portfolio Test

This test is met when –

2. Non-Residential Portfolio Test

This test is met when –

FA03/S116(7) does not apply for the purposes of the portfolio test. This means if seeding relief was claimed in respect of 6 or more dwellings that were purchased as part of one transaction, they cannot be treated as non-residential property when considering the number of interests to be treated as non-residential property.

Withdrawal

Relief for a transaction is withdrawn where a scheme fails to meet the ‘portfolio test’;

and the chargeable interest (or one derived from it) is still held by the scheme at the point of withdrawal.

Where relief is withdrawn because of failing to meet the portfolio test, the amount of SDLT payable is that amount that would have been paid but for the relief, or an ‘appropriate proportion’ of the relief.

Test not met at any time before the end of the seeding period - Full withdrawal

Where seeding relief has been claimed, but the portfolio test is not met immediately before the end of the seeding period, relief will be withdrawn in full. The amount of tax chargeable is the amount that would have been chargeable in respect of the transaction if seeding relief had not been available.

Test not met during the control period – Full or partial withdrawal

Where seeding relief has been claimed and the portfolio test is met immediately before the end of the seeding period (See SDLTM24730 ), but the scheme fails to meet the test:

  • during the control period, or

  • after the control period where such a failure is attributable to arrangements made before the end of the control period,

then the full amount of the relief, or an ‘appropriate proportion’ of it will be withdrawn.

The value of the ‘appropriate proportion’ is determined by comparing of the subject matter of the ‘relevant transaction’ and the property owned by the scheme at the point of withdrawal. This is illustrated in the following example.

Example 3
On 1 November 2023, PAIF Charlie, acquires major interests in 10 non-residential properties, and issues the vendor, Braithwaite, with £110 million worth of units in the PAIF as consideration for the properties. This is the ‘first property seeding date’ as it meets all the basic conditions for seeding relief. On 1 March 2026, PAIF Charlie disposes of 2 of the non-residential properties. As the disposals took place during the control period, PAIF Charlie no longer meets the non-residential portfolio test and so relief from SDLT is withdrawn in respect of the 8 properties still held by the scheme.