A criticism against Substantial Incorporation Structure (SIS) arrangements, which involve transferring beneficial ownership of mortgaged properties to a company, has been that such transfers breach mortgage terms and invalidate Section 162 Incorporation Relief. However, evidence presented during a ten-day DOTAS hearing, which concluded on 13 February 2026, indicates that this argument compresses several distinct legal questions.
The criticism often assumes that lender consent was required for such transfers, and its absence constituted a contractual breach, rendering declarations of trust ineffective. The DOTAS Tribunal, in its published judgment, highlighted that each link in this chain of reasoning requires separate legal and factual analysis.
The Tribunal concluded that an informed observer could not reasonably view obtaining Incorporation Relief as the single most important purpose of the overall SIS arrangements. Genuine non-tax reasons identified included the inability to refinance due to cladding issues, the desire to retain favourable mortgage terms, avoidance of early redemption penalties, and the flexibility to refinance only when commercially advantageous.
Examples presented to the Tribunal included clients facing significant immediate refinancing costs, with one client estimating over £150,000 for 16 properties and another around £100,000 for 35 mortgages. The SIS documentation involved a sale and purchase agreement, a declaration of trust, and an agency agreement, with original borrowers remaining personally liable under their mortgage contracts.