SDLT Higher Rate: Exception to Connected Persons Rule for Partnerships

SDLT 15% rate: when partnership links are ignored

For the SDLT 15% rate on some residential property purchases by companies and other non-natural persons, a special rule can ignore the usual tax connection between partners when deciding if someone is a non-qualifying individual. This applies only in a limited partnership case where the ownership condition in section 94(5) FA 2013 is met, and it does not remove any other family, trust or legal connection.

• The normal connected persons rule in section 1122(7) CTA 2010 is switched off for this specific SDLT test.
• That means people are not treated as connected only because they are partners, or because of links to another partner’s spouse, civil partner or relatives.
• The exception applies only when working out non-qualifying individual status for the SDLT 15% rate, not for all SDLT partnership issues.
• You must check whether the partnership ownership condition in section 94(5) FA 2013 is satisfied before relying on the exception.
• Other connections can still count, such as actual family relationships, trusts or other legal links.
• In practice, the key question is whether the only alleged connection is the deemed partnership connection that the SDLT rule ignores.

Scroll down for the full analysis.

SDLT 15% rate: when partnership connections are ignored for a non-qualifying individual

This page explains a narrow but important SDLT rule for the 15% rate on certain purchases of residential property by companies and other non-natural persons. The point is about when a person is treated as a “non-qualifying individual”, and in particular when partnership relationships do not create a connection between people who would not otherwise be connected.

What this rule is about

The higher 15% SDLT rate can apply when a non-natural person acquires a major interest in a dwelling. In working out whether that rate applies, the legislation looks at whether certain individuals are “non-qualifying individuals”. That can depend on who is connected with whom.

Normally, tax rules on connected persons can be wide. In company tax law, a partner is generally treated as connected with the other partners, and also with their spouses, civil partners and relatives. If that normal rule applied without modification, a business partnership could create connections between people who have no real family or trust link at all.

This page deals with an exception to that result.

What the official source says

HMRC’s manual says that, when identifying a non-qualifying individual for these SDLT rules, the connected persons rule in section 1122(7) of CTA 2010 does not apply.

That disapplied rule would otherwise treat a partner as connected with:

• any other partner in the partnership,
• the spouse or civil partner of any individual partner, and
• a relative of any individual partner.

The exception applies only for interests owned by partnerships that meet the ownership condition in section 94(5) FA 2013.

HMRC explains the purpose of the exception clearly: it prevents people from being treated as connected purely because they are in the same business partnership, where there is no separate family or trust connection.

What this means in practice

If you are analysing whether the 15% SDLT rate can apply, you should not automatically assume that all partners are connected with each other just because they are partners. For this specific purpose, that usual connected persons rule is switched off, but only in the limited partnership situation covered by the legislation.

This matters because connected-person status can affect whether an individual counts as a non-qualifying individual. If partnership links alone were enough, the rules could catch arrangements that are not really within the policy aim of the charge.

In practical terms, where a partnership meets the relevant ownership condition, you look past the deemed connection that would normally arise simply from being co-partners. You still need to consider whether there is some other reason why the people are connected, such as an actual family relationship or another relevant legal connection. The exception does not say that partners can never be connected. It says that this particular deemed connection rule does not apply here.

How to analyse it

A sensible way to approach the issue is:

• First, confirm that you are dealing with the SDLT 15% rate rules for acquisitions of residential property by certain non-natural persons.
• Next, identify why you need to decide whether someone is a non-qualifying individual.
• Then ask whether the property interest is owned by a partnership that meets the ownership condition in FA 2013 section 94(5).
• If that condition is met, do not apply the normal CTA 2010 section 1122(7) rule that treats partners, and their spouses, civil partners and relatives, as connected merely through the partnership.
• After that, check whether any connection exists on some other basis. The exception only removes this one route to connectedness.

The key question is not simply “are these people partners?” but “is the only alleged connection the deemed partnership connection that this SDLT rule disapplies?”

Example

Suppose A and B are in a trading partnership together. They are not related, are not spouses or civil partners, and there is no trust or other family arrangement linking them. Under the general connected persons rule in CTA 2010 section 1122(7), A and B would normally be treated as connected because they are partners.

But if the issue is whether someone is a non-qualifying individual for the SDLT 15% rate, and the interest is owned by a partnership meeting the ownership condition in FA 2013 section 94(5), that deemed connection is ignored. A is not treated as connected with B solely because they are partners.

If, however, A and B were also siblings, that would be a separate basis for connection. The exception would not remove that family connection.

Why this can be difficult in practice

The difficulty is that this is a targeted exception inside a wider connected persons framework. It is easy to over-apply it or under-apply it.

Three points often need care:

• The exception is not a general rule for all SDLT questions about partnerships. It applies only when identifying a non-qualifying individual for this part of the 15% rate rules.
• It applies only where the partnership interest meets the ownership condition in FA 2013 section 94(5). The manual extract does not set out that condition, so you need to check it separately.
• It removes only the deemed connection created by CTA 2010 section 1122(7). It does not remove other forms of connection that may exist on the facts or elsewhere in the legislation.

So the analysis is highly context-specific. A person may still be connected, but not because they happen to be in the same partnership.

Key takeaways

• For this SDLT purpose, partners are not treated as connected just because they are partners, if the statutory partnership ownership condition is met.
• The rule is designed to stop ordinary business partnerships from creating artificial connected-person links.
• You must still check whether any other family, trust or legal connection exists, because the exception is limited.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: SDLT Higher Rate: Exception to Connected Persons Rule for Partnerships

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