Special provisions relating to partnerships: Transfers of a chargeable interest to a partnership
Individual A grants a lease of non residential property to a partnership of which she is member. There are two other partners with whom partner A is not connected for the purposes of Part 3. Partner A is entitled to a 40% share of the income profits of the partnership.
As a result of the transfer the proportion of the leasehold interest owned by Partner A is reduced from 100% to 40%. The sum of the lower proportions (SLP) calculated in accordance with Para12 is 40 - see SDLTM33550
The net present value of the rents computed in accordance with FA03/Sch5, as applied by Para11, is £100,000.
The premium charged by A on the grant of the lease was £250,000. It is accepted that this was a market value premium.
The consideration chargeable on this transfer is calculated as follows:
- The market value of the premium x (100 - SLP) %: that is
- 250,000 x (100 - 40) % = 150,000
Although the current threshold for non residential property is £150,000 [FA03/S55] £1500 SDLT will be due on the premium element of the charge as the relevant rent exceeds £1000 (FA03, Sch5, para9A). Had the relevant rent been below £1000, no SDLT would have been due on this premium.
- The relevant chargeable proportion of the net present value of the rents: that is
- 100,000 x (100 - 40) % = 60,000
As the current rent threshold for non residential property is £150,000, and the chargeable proportion of the NPV is below this, there is no SDLT due on the rental element
- The SDLT due in this example is therefore £1500