Read the original guidance here:
HMRC SDLT: SDLTM33690 – Special provisions relating to partnerships: Incorporation of limited liability partnership FA03/S65

Special Rules for Transferring Property to a Limited Liability Partnership

This article explains the specific legal rules that relate to the transfer of property or interests when forming a limited liability partnership (LLP) in the UK, as stated in the Finance Act 2003, Section 65 (FA03/S65).

What is a Chargeable Interest?

A chargeable interest typically refers to a legal interest in property or land that can be taxed when transferred. This tax is known as Stamp Duty Land Tax (SDLT). Under certain situations outlined in FA03/S65, transferring a chargeable interest to an LLP may be exempt from this tax.

Key Conditions for Exemption

To qualify for the SDLT exemption when transferring a chargeable interest to a limited liability partnership, the transfer must meet specific conditions:

• Timing of the Transaction: The effective date of the transfer must occur no more than one year after the incorporation date of the LLP.
• Transferor’s Relationship with the LLP: At the time of the transfer, the person transferring the interest (referred to as the transferor) should be either:
• a partner in a partnership consisting exclusively of those who are members of the LLP or those who will become members shortly
• holding the interest as a nominee or bare trustee for one or more partners in that partnership.
• Proportional Interests: The interests transferred must maintain the same proportions for those individuals as they had before the transfer.
• This means:
• the proportions must stay unchanged after the transfer, or
• there should be no changes in those proportions as a result of a scheme intended to dodge taxes or duties.

Understanding ‘Relevant Time’

The term ‘relevant time’ is specific in this guidance:

• If the transferor nominated by the LLP acquired their interest after the LLP’s incorporation, “the relevant time” means right after they got the interest.
• If the transferor got their interest before the LLP was incorporated, then the relevant time refers to just before that incorporation.

Priority of FA03/S65 over Other Provisions

If both FA03/S65 and another provision (Paragraph 10) apply to the transfer, the rules under FA03/S65 take precedence. In such cases, the exemption from charge outlined by FA03/S65 will apply, and the provisions in Schedule 15 will not apply. HMRC prioritizes FA03/S65 in these situations.

Definition of Limited Liability Partnership

A limited liability partnership is a specific business structure recognized under two main pieces of legislation:

• The Limited Liability Partnerships Act 2000
• The Limited Liability Partnerships Act (Northern Ireland) 2002