Read the original guidance here:
HMRC SDLT: SDLTM33200 – Partnerships: Ordinary partnership transactions

Partnership Transactions and Stamp Duty Land Tax (SDLT)

When dealing with partnership transactions under the Stamp Duty Land Tax (SDLT) regulations, it’s important to understand how the law treats these situations. This article breaks down the essential elements of SDLT as they apply to ordinary partnerships.

Ordinary Partnership Transactions

According to SDLTM33210, ordinary partnership transactions involve partnerships where business activities are conducted under mutual agreement. These transactions can include the acquisition and transfer of property by the partnership.

SDLT is usually charged on the value of the property involved in a transaction. In the case of partnerships, the SDLT rules can change compared to individual transactions. This section outlines how these rules apply.

Who is Responsible for SDLT Payments?

According to SDLTM33220, the responsibility for SDLT payments lies with the partners of the partnership. It is important to understand which partners are active in the transaction, especially when property is acquired by the partnership.

• All partners may be involved: In many cases, all partners are collectively responsible for the SDLT obligations of the partnership.
• If a partner acts on behalf of others: The partner completing the transaction must ensure that SDLT is paid appropriately.

Joint and Several Liability

The principle of joint and several liability becomes relevant in partnership transactions when discussing SDLT. As stated in SDLTM33230, this means that each partner can be held accountable for the entire amount of SDLT owed by the partnership.

• If one partner defaults on payment: The other partners are still responsible to ensure the payment is made, thus protecting the interests of HMRC.
• Implications: This means that each partner should be aware of the SDLT liabilities when engaging in partnership transactions.

Representative Partners

In partnerships, a representative partner is often necessary for managing SDLT matters. According to SDLTM33240, this partner is responsible for completing the SDLT return and making payments to HMRC.

• Choosing a representative: It’s essential to select a partner who is organised and understands both the legal and tax aspects of the transaction.
• Responsibilities: The representative must ensure that all relevant information is provided in the SDLT return and that the payment is made on time to avoid penalties.

Consequences of Part 1 and Part 2 of the SDLT Legislation

The SDLT legislation consists of different parts that each have specific implications for partnership transactions. As explained in SDLTM33250, understanding how these parts interact is essential for compliant SDLT reporting.

• Part 1: Deals mainly with individual transactions without considering the partnership structure.
• Part 2: Specifically addresses how transactions conducted by partnerships are handled under SDLT.
• Key Implications: This means that while individual partners might handle their affairs differently, the partnership as a whole needs to adhere to the rules laid out in Part 2.

Examples of Partnership Transactions

Example 1: Acquisition of Property

Consider a partnership involving two partners, Jane and John. They decide to buy a commercial property worth £500,000 to run their business. SDLT will be calculated based on the total value of the property, not on each partner’s share. Here’s how that works:

• Total property value: £500,000
• Applicable SDLT rate: Based on current SDLT thresholds
• Joint responsibility: Both Jane and John are responsible for ensuring that the SDLT is paid, and either partner can act on behalf of the other to manage the paperwork.

Example 2: Transfer of Property between Partners

In another situation, suppose Jane decides to transfer her share of an existing property worth £300,000 to John. In this case, SDLT is again applicable, and it would be based on the transfer amount. Here’s the breakdown:

• Transfer amount: £300,000
• Potential SDLT liability: Calculated on this amount
• Responsibility: John will need to ensure that the payment is made, as both partners are still liable for any SDLT related to transactions made by their partnership.

These examples illustrate the importance of understanding SDLT in partnership contexts. Partners should pay close attention to the SDLT obligations arising from their transactions to avoid penalties and ensure compliance with HMRC regulations.