HMRC SDLT: SDLTM33260 – Ordinary partnership transactions: Example 1
Principles of Ordinary Partnership Transactions
This section of the HMRC internal manual provides guidance on ordinary partnership transactions, using Example 1 to illustrate key concepts. It focuses on the application of tax rules and regulations for partnerships.
- Explains the tax implications for ordinary partnership transactions.
- Provides a detailed example to clarify complex tax scenarios.
- Offers guidance on compliance with HMRC regulations.
- Assists in understanding the distribution of profits and losses.
Read the original guidance here:
HMRC SDLT: SDLTM33260 – Ordinary partnership transactions: Example 1
Example of Ordinary Partnership Transactions (SDLTM33260)
In this example, we look at a partnership consisting of three partners: A, B, and C. They purchase a property on 1st May 2019. Let’s break down the key points regarding their responsibilities under Stamp Duty Land Tax (SDLT).
Partnership Purchase Details
- Date of Purchase: 1st May 2019
- Partners Involved: A, B, and C
- Responsible Partners: A, B, and C are the responsible partners as they were partners on the effective date of the transaction.
The SDLT return must be submitted within 14 days of the property purchase date. This means the return is due by 15th May 2019, since the purchase occurred on the 1st.
Joining of Partner D
Partner D joins the partnership on 8th May 2019. It’s important to note that Partner D is considered a responsible partner with respect to the transaction.
Responsibility and Liability
Even though Partner D is now a responsible partner, his responsibility for paying SDLT is limited. Because Partner D joined after the property purchase was completed, he cannot be held liable for any SDLT due from the transaction. This limitation is outlined in guidance paragraph 7(1A).
- Effective Date: The effective date of any transaction is key in determining responsibility for SDLT.
- Liability Shield: Partner D cannot be held responsible for SDLT introduced by the earlier partners (A, B, and C), as he did not become a partner until after the effective date.
Penalties and Joint Responsibility
It’s also important to understand how liability works in the event of a penalty. If a penalty were to occur due to an omission by the partnership, Partner D would have joint responsibility with A, B, and C. This means that if the penalty situation arose while Partner D was a partner, he could be held liable along with the other partners.
- Joint and Several Liability: If a penalty comes about due to a failure in compliance, all partners are responsible together. This means that the tax authorities can pursue any one partner for the full amount of the penalty.
- Timing of Responsibility: The timing of when a partner joins the partnership affects what they are liable for in terms of SDLT. Since Partner D joined after the effective date, his responsibilities relate differently when it comes to SDLT compared to existing partners A, B, and C.
For further details, refer to SDLTM33270 for more examples related to partnership transactions and penalties.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM33260 – Ordinary partnership transactions: Example 1
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