Read the original guidance here:
HMRC SDLT: Guide on SDLT Rules for Transfers of Interests to Partnerships

Understanding Special Provisions for Partnerships in Land Transactions

What This Guidance Covers

This guidance explains the rules for stamp duty land tax (SDLT) when a person transfers an interest in land to a partnership. It covers several key scenarios involving partners, the partnership itself, and any connected individuals.

Key Situations Covered by Paragraph 10

Paragraph 10 applies in the following situations:

– A partner transfers a chargeable interest to their partnership.
– An individual transfers a chargeable interest to a partnership in exchange for an interest in that partnership.
– A connected individual transfers a chargeable interest to the partnership. A connected individual may include:
– Someone closely related to a partner, or
– Someone who becomes a partner due to the transfer.

These rules apply even if the transfer is part of setting up a new partnership or involves an existing partnership.

Partnership Transactions and Responsible Partners

The rules in Part 2 regarding ordinary partnership transactions apply when Paragraph 10 is relevant. For the purpose of these rules, the partners who are responsible for the transaction are defined as follows:

– The partners who were part of the partnership immediately before the transfer and remain partners after it.
– Any new partner who joins as a direct result of the transfer or related activities.

Impact of Election Under Paragraph 12A

It’s important to note that Paragraph 10 is subject to any elections made under Paragraph 12A. For more information on this, you can refer to SDLTM34060.

Additional Charges to Stamp Duty Land Tax

If there is a transfer of an interest within the framework of Paragraph 10, it may lead to additional stamp duty land tax charges later. This can occur if:

– There is a transfer of an interest in the partnership after the initial transfer.
– A partner withdraws money or other assets from the partnership.

These scenarios are explained further in Paragraphs 17 and 17A of the stamp duty regulations.

Examples for Clarity

To better understand these provisions, let’s examine a couple of examples:

Example 1: Transfer from Partner to Partnership
– Imagine a partner named John has a chargeable interest in a property. When John transfers this interest to his partnership, this action is covered under Paragraph 10.

Example 2: Getting a New Partnership Interest
– Sarah is not a partner but has a chargeable interest that she decides to transfer to an existing partnership in exchange for a partnership interest. This situation also falls under Paragraph 10, as Sarah is exchanging her property interest for a stake in the partnership.

Example 3: Connected Person’s Transfer
– Michael is the brother of Anna, who is a partner in a property investment partnership. If Michael transfers his chargeable interest in a property to Anna’s partnership, this too comes under Paragraph 10 because he is connected to a partner.

Forming New or Existing Partnerships

These provisions apply whether the transfer is involved in forming a new partnership or if it refers to an already established partnership. Regardless of the partnership’s status, the same rules about transferring chargeable interests apply.

Important Considerations when Transferring Interests

When considering transferring a chargeable interest to a partnership, it’s essential to keep the following in mind:

– Understand the roles and responsibilities of partners in relation to any property interests transferred.
– Be aware that any future changes to the partnership or individual interests may attract additional stamp duty charges.
– Check the implications of any elections made under Paragraph 12A which could affect how the transaction is treated under SDLT regulations.

The Bigger Picture of SDLT and Partnerships

Stamp duty land tax generally applies to transactions involving interests in land. The regulations are designed to prevent avoidance and ensure that tax is appropriately collected on property transfers.

The rules surrounding partnerships are complex, and the application of these rules must be understood clearly to avoid unexpected tax liabilities. It’s advisable for individuals and partnerships to seek professional guidance when engaging in significant land transactions.

Record-Keeping and Documentation Requirements

When engaging in the transfer of interests to partnerships and other related transactions, proper documentation is crucial. Here are key aspects to consider about record-keeping:

– Maintain detailed records of every transfer, including any agreements reached concerning the interest in the partnership.
– Keep copies of any elections made under Paragraph 12A and how these elections affect tax liabilities.
– Ensure that all partners are aware of their responsibilities and the implications of transferring interests, as their partnership roles may influence future SDLT assessments.

Summary of Responsibilities for Partners

In transactions governed by Paragraph 10, the responsible partners for SDLT purposes include:

– Those who were partners before the transfer took place and continue to be partners afterward.
– New partners who join as a result of the transfer or related activities.

This ensures that all partners are held accountable for their roles within the partnership concerning tax obligations arising from the property interests transferred.