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HMRC internal manual

Stamp Duty Land Tax Manual

Special provisions relating to partnerships: Interaction of FA03/S53 and Schedule 15

A partnership owns a chargeable interest (a freehold property, for example) which it wishes to transfer to a limited company, D. The partnership consists of three partners, individuals A, B and C, whose share of profits for the purposes of Sch15 are 60%, 20% and 20% respectively. The partners are unconnected for the purposes of Sch15, other than B and C, who are married.

B owns and controls company D, as does C (as her husband’s rights are attribute to her in determining control).

The freehold has a market value of £250,000 but D pays only £200,000 for it.

The vendors are deemed to be the three individual partners by Para2. Partners B and C are connected with the company and, therefore, each partner is connected to the company by TA88/S839 as this section is applied to FA03/S53 without restriction.

As a result the transfer to the company is deemed to be at not less than market value, by FA03/S53. In this case, the consideration chargeable under FA03/S53 will be the market value of £250,000.

The transaction also falls to be taxed under Para18 as the transfer is from the partnership to a person who is connected to one of the partners.

The sum of the lower proportions as calculated in accordance with Para20 is 40 - see SDLTM33750. As a result, the proportion of the market value chargeable as consideration for the purposes of SDLT is (100-40)%, that is 60% i.e. 100% less 40% already owned by B & C.

Where the provisions of both FA03/S53 and Para18 apply to a transfer of a chargeable interest to a company, the provisions of Para18 will take precedence to determine the chargeable consideration.

As a result, even though the FA03/S53 charge would be £250,000 [market value], what is actually chargeable is the proportion determined by Para18 (60% of £250,000) £150,000.