Example: Transfer of Property from Partnership to Corporate Subsidiary Explained

SDLT market value rule on transfers from a corporate partnership to a corporate partner

When land is transferred from a partnership to one of its corporate partners, and all the partners are companies, SDLT may be charged on the property’s full market value instead of the price paid. The key test is the paragraph 20 calculation of the sum of lower proportions; if that total is more than 75%, paragraph 24 applies. Any available relief, such as group relief, is considered only after deciding whether the market value rule applies.

• The rule applies to transfers of land from a partnership to a company that is already a partner, where every partner is a body corporate.
• If the paragraph 20 sum of lower proportions exceeds 75%, SDLT is based on market value rather than the actual consideration.
• In the example, Company B bought partnership property worth £5 million for £1 million, but its 80% pre-transfer partnership share meant the 75% threshold was passed.
• As a result, the chargeable consideration was treated as £5 million, not the £1 million paid.
• Group relief may still be available for companies in the same group, but this is a separate issue from whether paragraph 24 is triggered.
• The analysis depends on the parties’ positions immediately before and immediately after the transfer, so exact ownership percentages and timing are critical.

Scroll down for the full analysis.

When a corporate partnership transfers property to a corporate partner: how the para 24 market value rule can apply

This page explains an SDLT rule that can apply when land is transferred out of a partnership to a company that is itself one of the partners, and all the partners are companies. The issue matters because the SDLT charge may be based on the property’s full market value, not the price actually paid.

What this rule is about

The source material deals with a transfer of a chargeable interest from a partnership to one of its corporate partners. In SDLT, special partnership rules can replace the normal approach to consideration. Where all the partners are bodies corporate, you do not stop at the basic partnership transfer rule. You must also consider whether paragraph 24 applies.

Paragraph 24 is important because, if it applies, the chargeable consideration is treated as the market value of the interest transferred. That can produce a much larger SDLT charge than would arise if you looked only at the amount actually paid.

The example in the source shows how to work out the sum of the lower proportions, sometimes called the SLP, under paragraph 20. That calculation determines whether paragraph 24 is triggered.

What the official source says

The source example uses this structure:

• Company X owns two wholly owned subsidiaries, Company A and Company B.
• Company A has a 20% interest in a partnership.
• Company B has an 80% interest in the same partnership.
• The partnership transfers property worth £5 million to Company B for £1 million.

Because this is a transfer from a partnership, paragraph 18 applies. Because all the partners are bodies corporate, paragraph 24 must then be considered.

To decide whether paragraph 24 applies, the source calculates the SLP under paragraph 20 in five steps:

• Step 1: identify the relevant owner. Company B is a relevant owner because, immediately after the transaction, it is entitled to a proportion of the chargeable interest and, immediately before the transaction, it was a partner.
• Step 2: identify the corresponding partner or partners for that relevant owner. Company B is its own corresponding partner because it was the partner before the transfer and is the relevant owner after it. The source states that Company A cannot be a corresponding partner because it is not an individual.
• Step 3: identify the proportion of the chargeable interest to which the relevant owner is entitled immediately after the transfer. Here Company B owns 100% of the property after the transfer, so 100% is apportioned to it.
• Step 4: find the lower of two figures for each corresponding partner: the proportion of the chargeable interest attributable to that partner, and the partnership share attributable to that partner. For Company B those figures are 100% and 80%, so the lower proportion is 80%.
• Step 5: add the lower proportions together. Here there is only one, so the total is 80%.

Because the sum of the lower proportions is more than 75%, paragraph 24 applies. The chargeable consideration is therefore treated as the market value of the property transferred, which is £5 million.

The source then adds an important further point. Because the companies are in the same group, group relief under Schedule 7 Finance Act 2003 may be available, with modifications made by paragraph 27 as applied by paragraph 25(2).

What this means in practice

The practical message is that an intra-group transfer out of a corporate partnership can still trigger a market value SDLT charge before relief is considered. The fact that the buyer is already an 80% partner, or that the price paid is only £1 million, does not by itself prevent the market value rule from applying.

In the example, Company B ends up owning the whole property. Because its pre-transfer partnership share was already high at 80%, the paragraph 20 calculation produces an SLP above the 75% threshold. That is what brings in paragraph 24.

So the analysis works in two stages:

1. First, decide whether the special market value rule applies by carrying out the paragraph 20 calculation.
2. Then, if it does apply, consider whether a relief such as group relief may reduce or eliminate the SDLT charge.

This order matters. Relief is not the same thing as saying the market value rule never applied. The source treats market value as the starting point, then notes that group relief may be claimable.

How to analyse it

If you are looking at a transfer of land from a partnership to a company and all the partners are corporate entities, these are the main questions raised by the source material:

1. Is this a transfer from a partnership to which the partnership transfer rules apply?
2. Are all the partners bodies corporate? If so, paragraph 24 may need to be considered.
3. Who is the relevant owner immediately after the transaction?
4. Who is the corresponding partner for that relevant owner under the statutory test used in paragraph 20?
5. What proportion of the property is the relevant owner entitled to immediately after the transfer?
6. What is that person’s partnership share immediately before the transfer?
7. Taking the lower of those figures for each corresponding partner, what is the total SLP?
8. Is the total more than 75%? If yes, paragraph 24 applies and market value is substituted for actual consideration.
9. If market value is substituted, is any relief then available, such as group relief?

The source also shows the importance of timing. The tests look at positions immediately before and immediately after the transaction. Small changes in ownership structure or partnership shares can affect the outcome.

Example

Illustration based on the source material:

A partnership is owned 20% by Company A and 80% by Company B. The partnership owns land worth £5 million. The land is transferred to Company B for £1 million.

Company B is the relevant owner after the transfer because it becomes entitled to the whole property and was already a partner before the transfer. For the paragraph 20 calculation, Company B is the corresponding partner. After the transfer it owns 100% of the property, but its partnership share before the transfer was 80%. The lower figure is therefore 80%.

Because the sum of the lower proportions is 80%, which is more than 75%, paragraph 24 applies. SDLT is therefore worked out by reference to £5 million market value, not the £1 million actually paid.

If Company A and Company B are in the same SDLT group, group relief may still be available, subject to the relevant conditions and the modifications mentioned in the source.

Why this can be difficult in practice

Partnership SDLT rules are technical and highly formula-driven. The difficult part is often not the broad idea, but identifying the correct statutory roles and percentages at the correct time.

Several points can make the analysis harder:

• The transaction may look like a simple intra-group transfer, but the partnership rules can override that instinct and require a separate market value analysis first.
• The calculation depends on immediate pre- and post-transaction entitlements, so the precise legal steps matter.
• The source is an HMRC manual example. It explains HMRC’s approach, but the legal effect ultimately comes from the legislation.
• Relief questions are separate from the paragraph 24 trigger. A taxpayer may satisfy the market value rule and still be eligible for relief, or may fail relief conditions even within a corporate group.

The source also includes a technical statement that Company A cannot be a corresponding partner because it is not an individual. In practice, this is the kind of point that must be checked carefully against the legislation being applied, rather than treated as a free-standing general rule for all partnership cases.

Key takeaways

• When land is transferred from a partnership consisting wholly of companies, SDLT may be based on market value rather than the actual price.
• The key trigger is whether the paragraph 20 calculation produces a sum of lower proportions above 75%.
• Even if market value applies, intra-group relief may still be available and must be considered separately.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example: Transfer of Property from Partnership to Corporate Subsidiary Explained

View all HMRC SDLT Guidance Pages Here