HMRC SDLT: SDLTM33860 – Transfer of a chargeable interest from a partnership consisting wholly of bodies corporate – Example 2

Transfer of Chargeable Interest from a Partnership

This section of the HMRC internal manual provides an example of transferring a chargeable interest from a partnership consisting wholly of bodies corporate. It outlines the principles and concepts involved in such transactions.

  • Focuses on SDLTM33860, a specific tax code.
  • Explains the process of transferring interests within corporate partnerships.
  • Details legal and tax implications for involved parties.
  • Provides a comprehensive example for better understanding.

SDLTM33860 – Transfer of a Chargeable Interest from a Partnership Consisting Completely of Corporate Bodies – Example 2

This example builds on the previous one presented in SDLTM33850, where two companies, Company A and Company B, both hold a 50% interest in a partnership.

Step One: Identify the Relevant Owners

First, we need to determine which owners are relevant to the transaction:

  • Company B is classified as a relevant owner because right after the transaction, it has entitlement to a share of the chargeable interest. Additionally, it was a partner just before the transaction took place.

Step Two: Identify Corresponding Partners

Next, we’ll for each identified relevant owner, pinpoint their corresponding partner:

  • Company B serves as its own corresponding partner. This is because it was a partner before the transaction and is also the relevant owner in this case.
  • Company A cannot be considered a corresponding partner since it is not an individual.

Step Three: Understanding Rights After the Transaction

Now, let’s look at the ownership situation after the transaction:

  • Company B is entitled to receive 100% of the chargeable interest right after the transaction is completed.
  • Since Company B is the only corresponding partner, the entire proportion of 100% is allotted to it.

Step Four: Calculate the Lower Proportion

In this step, we need to assess the lower proportion for each individual listed as a corresponding partner. In this situation, that’s just Company B:

  • The two figures we’re comparing are:
    • 100%: This is the proportion of the chargeable interest that belongs to the partner (Company B).
    • 50%: This represents the partnership share assigned to the partner.
  • When we compare these two figures, the lower proportion is 50%.

Step Five: Sum of the Lower Proportions

Since we only have one lower proportion, we don’t need to combine multiple amounts:

  • The total of all lower proportions in this case is simply 50.

As this total is below 75, the provisions in Paragraph 24 do not apply. Therefore, the chargeable consideration for stamp duty lands tax (SDLT) will be calculated as 50% of the market value of the property involved, which amounts to £2.5 million.

Consideration for Grouped Companies

Because Company A and Company B are categorised as grouped companies, specific rules come into play:

  • The provisions set out in Schedule 7 of the Finance Act 2003 will be relevant here, and they will be adjusted by the modifications provided in Paragraph 27 (as referenced by Paragraph 25(2)).
  • Consequently, Company B might be eligible to claim group relief. For more detailed information, refer to SDLTM34360.

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Written by Land Tax Expert Nick Garner.
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