HMRC SDLT: Example of Chargeable Interest Transfer in Corporate Partnership with Group Relief Details

Transfer of Chargeable Interest in a Corporate Partnership

This example outlines the process of transferring a chargeable interest within a partnership consisting entirely of corporate entities. Specifically, it examines a scenario where Company A and Company B each hold a 50% interest in the partnership. The steps detail how Company B becomes the sole owner of the chargeable interest and the implications for tax considerations.

  • Company B is identified as the relevant owner after the transaction, having been a partner before the transaction.
  • Company B is its own corresponding partner, as it was a partner before and is the relevant owner after the transaction.
  • After the transaction, Company B holds 100% of the chargeable interest, with no other corresponding partners.
  • The lower proportion for Company B is determined to be 50%, based on its partnership share.
  • The chargeable consideration is 50% of the market value, amounting to £2.5 million.
  • Group relief may be applicable under Schedule 7 of the Finance Act 2003, as modified by specific provisions.

“`

Guidance Image

Understanding the Transfer of a Chargeable Interest from a Partnership of Companies

This article explains the process for handling the transfer of a chargeable interest when it occurs within a partnership made up solely of companies. The example used here shows how to navigate the steps to figure out the percentage of chargeable interest liable for duty.

Background

In the scenario we are examining, two companies, Company A and Company B, each hold a 50% interest in a partnership. This partnership owns a chargeable interest, which refers to a property or land interest liable for Stamp Duty Land Tax (SDLT) when it is transferred.

Key Steps in the Process

The process involves several steps that help determine the chargeable consideration for the transaction. Here are the steps broken down clearly:

Step One: Identify the Relevant Owner

  • The first task is to pinpoint who the relevant owner or owners are. In this case, Company B qualifies as a relevant owner.
  • This is because after the transaction, Company B is entitled to a portion of the chargeable interest, and right before the transaction, it was a partner in the business.

Step Two: Find the Corresponding Partner

  • Next, for each relevant owner found in Step One, identify their corresponding partner or partners.
  • Here, Company B is the corresponding partner to itself. Before the transaction, Company B was a partner, making it the relevant owner and its own corresponding partner.
  • Company A cannot be a corresponding partner in this case because it is not classified as an individual.

Step Three: Determine Chargeable Interest After the Transaction

  • After the transaction, Company B is recognized as having full entitlement to the chargeable interest.
  • Since Company B is the only corresponding partner, it receives 100% of the chargeable interest immediately after the transaction.

Step Four: Compare Proportions

  • The next step involves calculating the lower proportion for each corresponding partner.
  • In this example, we only consider Company B. We need to compare two figures:
    • The first figure is 100%, which is the proportion of the chargeable interest that corresponds to Company B.
    • The second figure is 50%, representing Company B’s partnership share.
  • Between these two numbers, the lower proportion is chosen, which in this case is 50%.

Step Five: Calculate the Sum of the Lower Proportions

  • At this stage, we only have one lower proportion to consider, which is the 50% from Step Four.
  • Since there are no other lower proportions to add together, the total in this instance remains as 50.

Charges and Reliefs

Now we need to look at how this lower proportion impacts the chargeable consideration:

  • Since the total of the lower proportions is 50, which is below the threshold of 75, Paragraph 24 of the relevant guidelines does not apply.
  • This leads to the chargeable consideration being 50% of the market value of the property involved. In our example, this means the chargeable consideration amounts to £2.5 million.

Group Relief Possibility

Additionally, since Company A and Company B are part of a grouped entity, specific provisions from Schedule 7 of the Finance Act 2003 apply here.

  • These provisions are adjusted by Paragraph 27 and are referenced by Paragraph 25(2), which could allow Company B to claim group relief.
  • For more information on group relief, refer to section SDLTM34360.

Conclusion of Steps

Following the above steps helps correctly identify the percentage of the chargeable interest that triggers the Stamp Duty Land Tax obligations. Understanding this process is essential for businesses involved in partnerships, especially those that consist entirely of corporate bodies. It ensures that all parties are clear about their responsibilities and potential reliefs that may be claimed.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Example of Chargeable Interest Transfer in Corporate Partnership with Group Relief Details

View all HMRC SDLT Guidance Pages Here

Search Land Tax Advice with Google Site Search

Overpaid Stamp Duty or Land Tax?
I offer expert advice. If I can help, please consider a donation. Email your query: [email protected]

Reclaim cases: No win, no fee. You get the refund first, then pay me.

Savings cases: Buying? I may reduce your land tax. You pay me a small % of any saving.

📧 [email protected] | 📞 0204 577 3323

Written by Land Tax Expert Nick Garner.
See free excerpts here.