Read the original guidance here:
HMRC SDLT: SDLTM29920 – Relief for transfers involving multiple dwellings: Application to partnership transactions

Relief for Transfers Involving Multiple Dwellings: Application to Partnership Transactions

Introduction to SDLTM29920

This section deals with relief available when transferring multiple dwellings as part of partnership transactions. Understanding how this relief works is essential for partnerships engaged in property transactions.

What is SDLTM29920?

SDLTM29920 outlines the specific relief that can apply to transactions involving multiple dwellings. This is particularly relevant for partnerships that are involved in the buying or selling of properties.

Understanding Multiple Dwellings Relief

When a partnership transfers multiple dwellings, it may qualify for relief from Stamp Duty Land Tax (SDLT) under specific circumstances. This relief can reduce the amount of tax payable when the properties are sold.

Conditions for Multiple Dwellings Relief

To qualify for multiple dwellings relief, the following conditions must be met:
– The transaction must involve at least two dwellings.
– The dwellings must not be treated as a single unit for tax purposes.
– Each dwelling must be suited for residential use.

An example to illustrate this:
– If a partnership sells two separate residential properties to a single buyer, they can apply for multiple dwellings relief on the total price of the two properties rather than paying full stamp duty on each property separately.

Special Circumstances Excluding Relief

It’s important to know that not all transactions qualify for this relief. Specifically, certain transactions related to partnerships are excluded:
– A transfer of a partnership interest that is classified as a land transaction by FA03/SCH15/PARAS14/17 is excluded.
– An acquisition of a partnership interest which is interpreted by FA03/SCH15/PARA16 as a major interest in land is also not eligible for this relief.
– If a partnership withdraws money as described in FA03/SCH15/PARA17A and it is deemed a land transaction, this too will not qualify.

Examples of Exclusions

1. If a partner sells their interest in a partnership owning multiple properties, this transfer is considered a partnership interest and will not qualify for the multiple dwellings relief, even if the partnership owns residential properties.
2. Should a partnership decide to cash out or withdraw funds based on properties owned, this transaction will not be eligible for relief, as it falls under the category of withdrawing money from a partnership.

Guidance on Multiple Transactions

In the case of linked transactions, special transitional rules may apply. Linked transactions occur when two or more transactions are related to each other. This might involve the same parties or a series of sales in a short period.

For more information on these special transitional rules, you can refer to SDLTM29903, which covers the specifics about linked transactions and how they may affect eligibility for relief.

Changes to MDR Effective from June 2024

There is an important update coming regarding the Major Dwellings Relief (MDR). As of 1 June 2024, the current MDR will be abolished for transactions that complete or significantly perform after this date. There are special transitional rules in place to handle the change, and more details can be found in SDLTM29902+.

Example of a Linked Transaction

Consider a partnership that sells three properties to the same buyer in one transaction. If these sales are related, they might be deemed linked transactions, allowing the partnership to apply the multiple dwellings relief on the combined total value of the properties rather than paying separate rates on each.

Understanding Relevant Transactions

For the purposes of this relief, it is crucial to define what qualifies as a ‘relevant transaction.’ A relevant transaction should involve a direct transfer of properties or an acquisition that meets the criteria set out by HMRC for partnerships operating in property transactions.

It’s important to assess any partnership agreements in place that could impact the transactions, as these may define how interests are held and transferred among partners, influencing whether transactions are deemed relevant.

Common Questions Regarding Partnerships and Relief

Here, we address some frequently asked questions that can help clarify misunderstandings surrounding multiple dwellings relief in partnership transactions:

Can a partnership apply for relief on a transfer of individual properties?

No, the relief applies only when transferring multiple dwellings in one transaction, rather than on individual property transfers.

What records do partnerships need to maintain regarding their transactions?

Partnerships should keep thorough records of all transactions and ensure they document how each property is classified (as a dwelling), the nature of the partnership interest, and any associated agreements that may impact tax relief eligibility.

What happens if a partnership sells a property and then acquires another partnership interest?

The acquisition of another partnership interest will not qualify for multiple dwellings relief. It’s essential to factor this into your planning to avoid unexpected tax liabilities.

Final Thoughts on SDLTM29920

It’s crucial for partnerships involved in property transactions to stay informed about SDLT regulations, especially concerning multiple dwellings relief. Proper guidance can help you navigate potential tax savings and ensure compliance with HMRC regulations.

Ensure you consult all relevant HMRC guidance and consider reaching out to a tax professional if you are unsure about any aspect of your transactions. Staying informed and prepared can significantly benefit your partnership in the long run.