Read the original guidance here:
HMRC SDLT: Understanding SDLT Liabilities for Partnerships in Property Transactions

Understanding Ordinary Partnership Transactions in SDLT

This article explains how Stamp Duty Land Tax (SDLT) applies to ordinary partnership transactions. We will break down the concepts and rules to help clarify the situation for partnerships buying property.

What is an Ordinary Partnership Transaction?

An ordinary partnership transaction refers to a situation where a group of members, known as partners, work together in a business. When they decide to buy a property, this transaction is treated in a specific way under SDLT rules.

Example of a Partnership Buying Property

Let’s consider a group of solicitors who are in partnership. They want to purchase a new property to use as their office. Here’s how this process works:

• The solicitors act through one of the partners, known as the representative partner.
• The partnership then buys a freehold property from someone who is not part of their partnership and is not related to any of the partners.

In this case, the partnership is entering into a land transaction. For SDLT purposes, this transaction is seen as being made by the partnership or on behalf of the partners individually.

Liability for SDLT

Once the partnership completes the property purchase, the partners share the responsibility for paying any SDLT owed on the transaction. This is known as joint and several liability. Here’s what that means:

• Each partner can be held responsible for the full amount of SDLT owed, even if they did not contribute equally to the cost of the property.

This means that if one partner does not pay their share, others may have to cover the difference to ensure the SDLT is paid in full.

New Partners and SDLT Responsibilities

When a new partner joins the partnership after the date of the transaction, they will not be responsible for paying SDLT related to that specific transaction. However, they may face other liabilities:

• The new partner does not owe any SDLT or interest on the taxes due for that transaction.
• They could, however, be liable for penalties associated with the late payment of SDLT if it applies.

For a deeper understanding of these responsibilities and examples, refer to SDLTM33260 and SDLTM33270.

Calculating Chargeable Consideration

When a partnership undertakes a property transaction, it is essential to determine the chargeable consideration for SDLT. In most cases, this amount is calculated under the standard SDLT rules.

Here are the key points regarding chargeable consideration:

• The ‘consideration’ refers to the amount paid for the property.
• Typically, full consideration is paid upon completion of the transaction.
• This total amount is what SDLT is charged on.

As Part 3 of the SDLT legislation does not apply to this transaction, calculating the chargeable consideration follows the normal guidelines as detailed in FA03/Sch4.

Final Remarks on SDLT and Ordinary Partnerships

It’s important for partners in an ordinary partnership to understand their responsibilities under SDLT when buying property. Joint liability means that all partners need to be aware of the financial implications of their decisions, and new partners joining after a transaction should understand their position regarding SDLT liabilities and penalties.

For more detailed information, see the specific guidelines available through resources like SDLTM33250, which discusses the effects of the SDLT rules on ordinary partnership transactions.