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HMRC internal manual

Stamp Duty Land Tax Manual

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HM Revenue & Customs
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Special provisions relating to partnerships: Transfer of interest in a property investment partnership

Where there is a transfer of an interest in a property investment partnership and the relevant partnership property includes a chargeable interest, the transfer of the interest in the partnership is deemed to be a land transaction for SDLT purposes.

Property investment partnership is defined at Para14(8) as a partnership whose sole or main activity is investing or dealing in chargeable interests, whether or not that activity involves the carrying out of construction operations on the land in question.

The chargeable consideration for the transaction is taken to be a proportion of the market value of the relevant partnership property. Actual consideration is not taken into account in determining the chargeable consideration.

The purchaser under the transaction is the person who acquires an increased partnership share or, as the case may be, becomes a partner in consequence of the transfer.

For a new partner, the proportion in question is the partnership share immediately after the transfer. Where there is no new partner, the proportion is the difference between the partner’s partnership share before and after the transfer.

Transfers in property investment partnerships are divided into two types: Type A and Type B. The meaning of the two categories is described at SDLTM34030.

What is taken into account as relevant partnership property depends on whether the transfer is categorised as a Type A or a Type B transfer. More categories of property are taken into account as relevant partnership property where the transfer is of Type A.

The transfer of an interest to which this paragraph applies is treated as a chargeable interest for the purposes of FA03/Sch7/ Para 3(1) (withdrawal of group relief).

Transfers of interests in partnerships other than property investment partnerships are not generally chargeable to SDLT. If, for example, a person buys an interest in a farming partnership then there is a transfer of interest in the partnership. However, providing the farming partnership is not a property investment partnership and there has not previously been a transfer to the partnership falling within Para10 then the acquisition of the interest is not deemed to be a land transaction. As a result, no liability to SDLT arises, even though the partnership holds chargeable interests.

A partnership that rents several houses in multiple occupation as a commercial undertaking, where the partners spend a significant amount of time managing the tenants, collecting rents and undertaking repairs will be a property investment partnership.

If a partnership carries on construction operations on the land in question that may not affect its status as a property investment partnership. So, for example, a partnership that is mainly investing in property but carrying out some development work as well may be a property investment partnership for the purposes of FA03/Sch15. However a partnership the main activity of which is developing property such as a house builder and which derives most of its profits from development work will not be a property investment partnership.

In each case, a partnership will exist if and only if the entity carries on a ‘business’. HMRC’s guidance on what constitutes a business is set out in the Property Income Manual atPIM1030 and BIM72000. Where an entity does not carry on a business there will not be a partnership for SDLT purposes and the partnership rules set out in this chapter will not apply: even if the parties are bound by a partnership deed.

As noted, what is taken into account as relevant partnership property depends on whether the transfer is categorised as a Type A transfer or a Type B transfer - see SDLTM34020.

Where the transfer is of Type A, most chargeable interests count as relevant partnership property.

Where the transfer is of Type B, more categories of chargeable interest are excluded from the definition, including:

  1. any chargeable interest in respect of whose transfer to the partnership an election has been made under Para12A is not taken into account as relevant partnership property and
  2. any chargeable interest whose transfer to the partnership was not an event within Para10.

Whether the parties involved in the transactions are connected or not does not affect the charge under Para14 as this is a market value charge.