Transfer of Property to Company X: Stamp Duty Land Tax Example

SDLT on Transfers from a Corporate Partnership to a Connected Company

Where land is transferred out of a partnership made up entirely of companies to a company connected with one of the partners, the SDLT market value charge is not always reduced. HMRC’s view in this example is that, although the transferee counts as a relevant owner, there are no corresponding partners, so the sum of lower proportions is 0. As a result, the special reduction does not apply and SDLT is charged on the full market value, subject to any separate relief such as group relief if available.

• The rule applies to land transfers involving partnerships whose members are all companies.
• A connected company transferee can qualify as a relevant owner if it acquires the property and was connected with a partner before the transfer.
• If there are no corresponding partners under the statutory test, the sum of lower proportions is 0.
• Where the lower proportion is below 75, paragraph 24 does not reduce the charge, so SDLT is based on 100% of market value.
• In HMRC’s example, a property worth £5 million transferred to Company X is taxed on the full £5 million market value.
• Group relief is a separate issue and must be considered independently under the relevant rules.

Scroll down for the full analysis.

SDLT on a transfer from a corporate partnership to a connected company: when the market value rule can apply in full

This page explains a specific SDLT partnership rule for transfers of property out of a partnership made up entirely of companies. The point matters because, in some cases, SDLT is charged only on part of the market value, but in this example HMRC says the special reduction does not apply at all. The result is that SDLT is charged on 100% of the property’s market value, subject to any separate relief such as group relief if it is available.

What this rule is about

Special SDLT rules apply when land is transferred between a partnership and its partners, or between a partnership and persons connected with partners. Where the partnership consists wholly of bodies corporate, the legislation uses a step-by-step method to decide whether the normal market value charge should be reduced.

The key concept in this example is the “sum of lower proportions” or SLP. Broadly, that figure measures whether there is enough continuity between the persons interested in the property before the transfer and the persons interested in it after the transfer. If the lower proportion is less than 75, the relieving rule in paragraph 24 does not apply.

In practical terms, that means the transfer is taxed on the full market value of the property.

What the official source says

The HMRC manual says this example is the same as an earlier example, except that the property is transferred to Company X rather than to one of the existing partner companies.

At Step One, Company X 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 connected to a partner.

At Step Two, HMRC says there are no “corresponding partners”. That is because:

• Company X was not itself a partner, and
• the existing partners, Company A and Company B, are not individuals, so the Step Two(b) test is not met.

HMRC therefore concludes that the SLP is 0.

Because the lower proportion is less than 75, paragraph 24 does not apply. The chargeable consideration is therefore 100% of the market value, which in the example is £5 million.

The manual then adds that group relief may or may not be available, depending on the status of the partnership and the separate rules in paragraph 27.

What this means in practice

This example shows that a transfer to a company connected with a corporate partner is not, by itself, enough to reduce the SDLT charge under the corporate partnership rules.

The fact that the transferee is connected to a partner helps at Step One, because it can make the transferee a relevant owner. But that does not solve Step Two. You still need to identify a corresponding partner under the statutory test. In this example, that cannot be done, so the calculation produces no reduction.

The practical effect is significant:

• the transaction is not taxed by reference to any discounted proportion of value under paragraph 24;
• instead, SDLT is charged on the whole market value of the land transferred; and
• any mitigation would need to come from some other rule, such as group relief, if the legislation allows it on the facts.

This is a good example of how technical partnership rules can produce a much harsher result than a reader might expect from the commercial relationship alone.

How to analyse it

When looking at a transfer of land from a partnership consisting only of companies, it helps to work through the issue in this order.

1. Identify the transferee and ask why it might count as a relevant owner.

   In this example, Company X counts because it acquires an interest in the property and was connected with a partner immediately before the transfer.

2. Then ask whether there are any corresponding partners for that relevant owner.

   This is the critical step here. HMRC’s view is that there are none, because Company X was not itself a partner and the alternative test relied on at Step Two(b) does not work where the partners are companies rather than individuals.

3. Calculate the SLP.

   If there are no corresponding partners, the SLP is 0.

4. Compare the lower proportion with the 75 threshold.

   If it is less than 75, paragraph 24 does not apply.

5. If paragraph 24 does not apply, consider whether any separate relief is in point.

   The manual specifically mentions group relief, but says its availability depends on the status of the partnership and paragraph 27. So that is a separate legal question, not something decided by this example alone.

Example

Illustration: a property held by a partnership of Company A and Company B is transferred to Company X. Company X is connected with one of the partners, but it was not itself a partner before the transfer.

On HMRC’s analysis:

• Company X is a relevant owner at Step One;
• there are no corresponding partners at Step Two;
• the SLP is therefore 0; and
• because that is below 75, the special reduction in paragraph 24 is unavailable.

The transfer is therefore charged on the full market value of the property. If that market value is £5 million, the chargeable consideration is £5 million.

Why this can be difficult in practice

The difficulty is that the statutory method is highly technical and the result may not match the commercial intuition that “the property is staying within the same group”.

Several points need care:

• The fact that a company is connected with a partner does not automatically mean the partnership transfer rules will reduce the SDLT charge.
• The status of the partners matters. In this example, HMRC’s conclusion depends in part on the fact that the partners are companies, not individuals.
• The partnership rules and group relief are separate questions. A failure under paragraph 24 does not necessarily answer the group relief position, but it does mean you must test group relief independently and carefully.
• The manual gives HMRC’s interpretation of the legislation. The legal result ultimately depends on the statutory wording applied to the precise facts.

So the main practical trap is assuming that a transfer to a connected group company will attract a reduced SDLT charge under the partnership code. This example shows that the structure of the ownership and the exact statutory steps matter more than the broad group relationship.

Key takeaways

• In a transfer from a partnership made up entirely of companies, a connected company transferee may be a relevant owner without there being any corresponding partner.
• If no corresponding partner can be identified, the SLP can be 0, which means paragraph 24 does not apply.
• Where paragraph 24 does not apply, SDLT is charged on 100% of market value, although separate relief such as group relief may still need to be considered.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Transfer of Property to Company X: Stamp Duty Land Tax Example

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