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HMRC internal manual

Stamp Taxes on Shares Manual

Partnerships: Partnerships and partnership interests: transfer of a partnership interest

Until the introduction of the Stamp Duty Land Tax provisions for partnerships on 23 July 2004, a transfer on sale of a partnership interest attracted stamp duty at the general property rates (then 1%, 3% and 4%, depending upon the consideration) without any need to look through to the underlying partnership assets.

With effect from 23 July 2004, where a partnership interest is transferred on sale by means of a written instrument, the stamp duty charge is calculated in accordance with rules set out in paragraphs 31-33 of FA03/SCH15. But for paragraph 31, stamp duty would have been abolished on instruments which transfer partnership interests by FA03/S125; paragraph 31 is a saving provision which preserves the stamp duty charge on such instruments, subject to paragraphs 32 and 33. Stamp duty on the transfer of partnership interests is still charged at the general rates given in paragraph 4 of FA99/SCH13, not the 0.5% rate for the transfer of stock or marketable securities (see STSM021040 for a description of “stock or marketable securities”). However, paragraphs 32 and 33 will often greatly reduce the stamp duty chargeable.

Paragraph 32 applies where the partnership property includes a ‘chargeable interest’ in land for Stamp Duty Land Tax purposes. The paragraph reduces the consideration for stamp duty purposes by ‘the excluded amount’. Put broadly, the excluded amount is the market value of the chargeable interest (less any outstanding loan secured on it) multiplied by the percentage partnership interest acquired.

Paragraph 33 may reduce the stamp duty chargeable depending on the extent to which the partnership property consists of stock or marketable securities. If the partnership holds no stock or marketable securities then no stamp duty is chargeable. If the partnership does hold stock or marketable securities then paragraph 33 caps the amount of stamp duty chargeable. The maximum amount of stamp duty chargeable is the duty that would be chargeable if (a) the instrument were an instrument effecting a transfer of the stock and marketable securities (i.e. subject to stamp duty at 0.5%), and (b) the consideration were equal to the market value of the stock or marketable securities (less any outstanding loan secured on them) multiplied by the percentage partnership share acquired.

See STSM091060 for an example calculation. Also see STSM021270 and STSM022160.

Non-United Kingdom stocks and marketable securities held by a partnership will be taken into account when calculating the stamp duty liability on an instrument transferring an interest in that partnership.

An instrument which transfers a partnership interest is not regarded as duly stamped until it has been adjudicated (see STSM022010 and STSM021270).