Special provisions relating to partnerships: Transfers of a chargeable interest to a partnership
The facts of example 2 [see SDLTM33540] were that individual D owns a chargeable interest (again, a freehold property) which he wishes to transfer to a partnership of which he is a member. There are two other partners, individuals E and F. Partner D is not connected with Partner F for the purposes of part 3, schedule 15, but he is married to Partner E, so is connected with her for the purposes of SDLT.
Partner D is entitled to a 30% share of the income profits of the partnership. Partner E is also entitled to the same share, with partner F being entitled to the balance of 40%.
Partner D is the only relevant owner here because, immediately before the transaction, he was entitled to a proportion of the chargeable interest, and immediately after the transaction, he is a partner.
Partner D is his own corresponding partner as, immediately after the transaction he is a partner and he is the relevant owner.
In addition, Partner E is a corresponding partner in relation to the relevant owner Partner D. This is because, immediately after the transaction she is a partner and she is an individual connected with Partner D, the relevant owner.
Partner D was entitled to 100% of the chargeable interest immediately before the transaction.
This proportion can be allocated between the corresponding partners, Partner D and Partner E, to give the most beneficial result. For the sake of this example, let us allocate the proportion equally to the Partner D and Partner E.
We now find the lower proportion for each person who is a corresponding partner in relation to one or more relevant owners.
The lower proportion is the proportion of the chargeable interest attributable to the partner, or if lower, the partner’s partnership share immediately after the transaction.
Here the calculation is the same for each corresponding partner because the proportion of the chargeable interest attributable to each partner at Step 3 is 50% and each partner’s partnership share immediately after the transaction is 30%.
Hence, the lower proportion for each person who is a corresponding partner is 30.
Adding together the lower proportions of each person who is a corresponding partner gives 30 plus 30, that is 60.
This figure represents the sum of the lower proportions (SLP).
Para 10(2) provides that the proportion of the market value chargeable is given by (100 - SLP)% which, in this case, is (100 - 60)% - that is 40%.