SDLTM33550 - Special provisions relating to partnerships: Transfers of a chargeable interest to a partnership

The purpose of the calculation in Para 12 is to ensure that SDLT applies to the extent that a proportion of a chargable interest is transferred to a partnership. It achieves this by tracing the proportion of the chargeable interest which is retained by the original owner by virtue of being a partner (or connected to a partner). The sum of the lower proportions in relation to a transaction to which Para10 applies is determined as follows:

Step One

Identify the relevant owner or owners.

A person is a relevant owner if—

  1. immediately before the transaction, he was entitled to a proportion of the chargeable interest, and
  2. immediately after the transaction, he is a partner or connected with a partner.
Step Two

For each relevant owner, identify the corresponding partner or partners.

A person is a corresponding partner in relation to a relevant owner if, immediately after the transaction—

  1. he is a partner, and
  2. he is the relevant owner [or is an individual connected with the relevant owner].

If there is no relevant owner with a corresponding partner, the sum of the lower proportions is nil.

Step Three

For each relevant owner, find the proportion of the chargeable interest to which he was entitled immediately before the transaction.

Apportion that proportion between any one or more of the relevant owner’s corresponding partners.

There is no set method of performing this apportionment and it can be carried out to give the most beneficial result.

Step Four

Find the lower proportion for each person who is a corresponding partner in relation to one or more relevant owners.

The lower proportion is—

  1. the proportion of the chargeable interest attributable to the partner, or
  2. if lower, the partner’s partnership share immediately after the transaction.

The proportion of the chargeable interest attributable to the partner is—

  1. if he is a corresponding partner in relation to only one relevant owner, the proportion (if any) of the chargeable interest apportioned to him (at Step Three) in respect of that owner;
  2. if he is a corresponding partner in relation to more than one relevant owner, the sum of the proportions (if any) of the chargeable interest apportioned to him (at Step Three) in respect of each of those owners.
Step Five

Add together the lower proportions of each person who is a corresponding partner in relation to one or more relevant owners.

The result is the sum of the lower proportions.

For the purposes of this paragraph persons who are entitled to a chargeable interest as beneficial joint tenants shall be taken to be entitled to the chargeable interest as beneficial tenants in common in equal shares [Para 12(2)].

For the purpose of paragraph (b) of Step 2 a company is to be treated as an individual connected with the relevant owner in so far as it—

  1. holds property as trustee, and
  2. is connected with the relevant owner only because of section 1122(6) of the Corporation Tax Act 2010

[Para 12(3)]