Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Stamp Duty Land Tax Manual

From
HM Revenue & Customs
Updated
, see all updates

Special provisions relating to partnerships: Stamp Duty implications of Schedule15 - Example

 

Example 1

A partnership of A and B has with relevant partnership property including a commercial unit and various shareholdings in several companies. The commercial unit has a market value of £1.5 million, subject to an outstanding mortgage debt of £500,000, and the shares have a market value of £580,000.

C joins the partnership paying £400,000 for a 25 per cent share. The provisions of para14 would be considered when establishing any SDLT liability but as the relevant partnership property includes shares we also need to consider any SD liability under Paras31-33.

Para 32 states that the SD liability will be based on the consideration given less the excluded amount.

Firstly we need to establish the net market value of the chargeable interest in accordance with Para 32(6):

MV - SL

MV = £1.5 million

SL = £500,000

Net market value equals £1 million.

We now need to establish the appropriate proportion.

As C was not a partner before the transfer this will be equal to the partnership he acquired - i.e. 25 per cent

The excluded amount is therefore

25% x £1 million = £250,000

To establish consideration for SD purposes we look at the consideration passing less the excluded amount:

£400,000 - £250,000 = £150,000.

This is the consideration for SD purposes. The rates of duty are as laid down in Para4/Sch13/FA99, but the instrument of transfer can benefit from a certificate of value in the form set down at Para6/Sch13/FA99. If the instrument contains a £250,000 certificate, the appropriate rate of duty is 1 per cent. The duty on £150,000 is thus £1,500.

However, Para33/Sch15/FA03 tells us that the duty payable shall not exceed that which would be payable on an equivalent transfer of those particular stocks and marketable securities.

In the first instance, it is necessary to look at the nature of the assets in the form of stocks and marketable securities. Any that would be exempt from charge on a transfer of same, such as some forms of loan stock or bearer shares, are disregarded. (But note that there is no territorial scope. If the assets include, say, common stock in a US company, these are not disregarded but attract Stamp Duty under this legislation.) In this example, all of the assets held in stocks or marketable securities would be chargeable if transferred separately.

We therefore need to calculate the appropriate proportion of the net market value of the shares:

The net market value is £580,000 as there was no loan secured on the shares.

The proportion of the partnership acquired by C is 25 per cent

The net market value of the assets in the form of stocks and market chargeable is therefore 25% x £580,000 = £145,000. Duty on this sum at the 0.5 per cent rate is £725.

As this is less than the sum arrived at under para32 the original SD liability of £1,500 is limited to £725.

Example 2

A partnership of A and B has relevant partnership property including a commercial unit and various shareholdings in several companies. The commercial unit has a market value of £1.5 million subject to an outstanding mortgage debt of £500,000 and the shares have a market value of £180,000.

C joins the partnership paying £300,000 for a 25 per cent share. The provisions of para14 would be considered when establishing any SDLT liability but as the relevant partnership property includes shares we also need to consider any SD liability under Paras31-33.

Para 32 states that the liability will be based on the consideration given less the excluded amount.

Firstly we need to establish the net market value of the chargeable interest in accordance with Para 32(6):

MV - SL

MV = £1.5 million

SL = £500,000

Net market value equals £1 million.

We now need to establish the appropriate proportion.

As C was not a partner before the transfer this will be equal to the partnership share he acquired - i.e. 25 per cent

The excluded amount is therefore

25% x £1m = £250,000

To establish consideration for SD purposes we look at the consideration passing less the excluded amount:

£300,000 - £250,000 = £50,000.

This will be the consideration for SD purposes.

As the SD consideration is less than the 0 per cent threshold, if a certificate of value at £125,000 is included in the instrument, the SD liability is nil, so there is no need to consider Para 33.