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HMRC internal manual

Stamp Duty Land Tax Manual

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

Company X has two 100% subsidiaries - Company A and Company B

Company A has a 20% interest in a partnership and Company B has an 80% interest.

The partnership transfers property (market value £5m) to Company B for £1m

As this is a transfer where Para 18 (transfer from a partnership) applies and all the partners are bodies corporate, we need to consider whether the provisions of para24 will apply.

First we need to ascertain the SLP under para20 - see SDLTM33750.

Step One

Identify the relevant owner or owners.

Company B is a relevant owner because, immediately after the transaction, it is entitled to a proportion of the chargeable interest and immediately before the transaction it was a partner.

Step Two

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

Company B is its own corresponding partner because, immediately before the transaction it was a partner and it is the relevant owner.

(Company A can not be a corresponding partner as it is not an individual)

Step Three

Company B is entitled to 100% of the chargeable interest immediately after the transaction.

As there is only one corresponding partner, this proportion is all apportioned to Company B.

Step Four

The lower proportion for each person who is a corresponding partner (here Company B) is the proportion of the chargeable interest attributable to the partner, or if lower, the partnership share attributable to the partner.

In this case the figures are 100% (proportion of the chargeable interest attributable to the partner) and 80% (partnership share attributable to the partner) respectively, so the lower proportion is 80.

Step Five

We just have one lower proportion, so there is nothing to add together. As a result, the sum of the lower proportions in this instance is 80.

As the lower proportion is more than 75 Para 24 does apply and the chargeable consideration is taken as equal to the market value of the interest transferred.

Here the market value is £5m, however as the companies are grouped the provisions of Schedule 7 Finance Act 2003 apply, modified by para27 (as applied by Para 25(2)) and Company B may be able to claim group relief - see SDLTM34360.