Connected Persons Rules: Corporation Taxes Act 2010 Modifications for Stamp Duty Land Tax

When people are treated as connected under SDLT partnership rules

For SDLT partnership rules in Part 3 of Schedule 15, the usual tax definition of connected persons is changed. In particular, people are not treated as connected just because they are partners in the same partnership, and extra limits apply when working out the paragraph 12 or 20 anti-avoidance calculations.

• The starting point is section 1122 of the Corporation Tax Act 2010, but it applies with specific changes for SDLT partnership cases.
• The normal rule that treats partners as connected simply because they are partners is switched off for Part 3.
• This means you must not assume two partnership members are connected if their only link is the partnership itself.
• For the “sum of the lower proportions” calculation under paragraph 12 or paragraph 20, certain trustee-settlement connections are also ignored.
• These changes are meant to keep the anti-avoidance rules focused on genuine risk and stop ordinary partnership arrangements being caught too widely.
• In practice, always check the exact SDLT provision being applied, because the connected persons test can differ between Part 3 generally and the specific paragraph 12 or 20 calculation.

Scroll down for the full analysis.

When are people “connected” for SDLT partnership rules?

This page explains how the SDLT partnership rules decide whether people are “connected” for the purposes of Part 3 of Schedule 15. That matters because the connected persons rules can affect how transfers involving partnerships are taxed, especially where anti-avoidance provisions apply. The key point is that the usual tax definition of connected persons is modified for these rules.

What this rule is about

SDLT uses special rules for partnerships. Within those rules, it is sometimes necessary to ask whether a person is connected with another person. The answer can change the tax result, particularly where legislation is trying to prevent manipulation of partnership shares or ownership interests.

The starting point is the connected persons definition in section 1122 of the Corporation Tax Act 2010. But for SDLT partnership purposes, that definition does not apply in full. Part 3 makes specific changes to it.

What the official source says

The source says that section 1122 of the Corporation Tax Act 2010 applies for the purposes of Part 3, but with modifications.

First, subsection (7) is left out. That subsection would otherwise treat partners as connected with each other simply because they are partners. For SDLT partnership purposes, that automatic connection does not apply.

Second, when calculating the “sum of the lower proportions” under paragraph 12 or paragraph 20, section 1122 also applies without subsection (6)(c) to (e). Those provisions concern a trustee being connected with a settlement. The source explains that this omission is intended to ensure the anti-avoidance rules in paragraphs 12 and 20 are targeted correctly.

What this means in practice

The practical effect is that you cannot assume two people are connected just because they are in the same partnership. If the only link between them is that they are partners, that is not enough for Part 3.

This can be important where SDLT consequences depend on whether a transfer involves connected persons. A broader connected persons rule might pull ordinary partnership arrangements into anti-avoidance provisions too easily. The modified rule narrows that risk.

The separate change for paragraph 12 and paragraph 20 is more technical. Where those provisions require a calculation of the sum of the lower proportions, some trustee-settlement connections are ignored. According to the source, this is done so that the anti-avoidance calculation focuses on the relationships that matter for those provisions, rather than catching cases too widely because of trust connections that are not the real target.

How to analyse it

A sensible way to approach this issue is:

• Identify whether you are working within Part 3 of the SDLT partnership rules.
• Check why connected persons status matters in the particular provision you are applying.
• Start with section 1122 of the Corporation Tax Act 2010 as the general definition.
• Then apply the SDLT modifications carefully.
• Do not treat two people as connected merely because they are partners in the same partnership.
• If you are calculating the sum of the lower proportions under paragraph 12 or paragraph 20, remember that certain trustee-settlement connections are also switched off for that calculation.

The key discipline is to ask: connected for what purpose? The answer may differ depending on whether you are applying Part 3 generally, or the specific paragraph 12 or 20 calculation.

Example

Illustration: A and B are members of a property partnership. There is no family relationship between them, and neither controls the other. Their only link is that they are partners.

For Part 3 purposes, they are not treated as connected solely because they are partners. So if a provision depends on whether A is connected with B, the partnership relationship alone does not create that connection.

By contrast, if A and B were connected for some other reason recognised by section 1122 as modified, that separate connection could still matter.

Why this can be difficult in practice

The difficulty is that “connected persons” is a familiar tax concept, and advisers may instinctively apply the full section 1122 definition without noticing the SDLT modifications. That can lead to the wrong answer.

There is also a second layer of complexity because the rule changes again for the paragraph 12 and 20 calculation. So the relevant connected persons test is not identical in every context within the partnership code.

Trust and settlement structures can make this especially technical. The source indicates that some trustee-settlement connections are deliberately ignored for the anti-avoidance calculation, but the exact effect in a real case will depend on the structure and on which statutory step is being applied.

Key takeaways

• For SDLT partnership rules in Part 3, partners are not connected just because they are partners.
• The usual tax definition in section 1122 CTA 2010 applies only with specific omissions.
• For paragraph 12 and 20 calculations, certain trustee-settlement connections are also ignored to keep the anti-avoidance rule properly targeted.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Connected Persons Rules: Corporation Taxes Act 2010 Modifications for Stamp Duty Land Tax

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