HMRC SDLT: SDLTM33740 – Sum of the lower proportions – Para20. Example 2

Sum of the Lower Proportions – Example 2

This section of the HMRC internal manual explains the calculation of the sum of the lower proportions as outlined in Paragraph 20. The example provided illustrates the application of this principle in a practical scenario.

• Details the methodology for calculating the sum of the lower proportions.
• Includes a practical example to demonstrate the calculation process.
• Part of the HMRC internal manual, offering guidance to HMRC staff.
• Published by HM Revenue & Customs on GOV.UK.

Example 2: Partnership Property Transfer

Imagine a partnership that owns a piece of property (like a freehold) and wants to transfer this property to one of its partners, named Partner D. There are two other partners in this group, Partner E and Partner F. Even though Partner D and Partner F are not connected in the way rules state, Partner D is married to Partner E, making them connected for the purposes of Stamp Duty Land Tax (SDLT).

The ownership structure among the partners is as follows:

• Partner D owns 30% of the partnership.
• Partner E also owns 30% of the partnership.
• Partner F holds the remaining 40% of the partnership – as explained in SDLTM33770.

Thus, when Partner D acquires the property, they are getting 70% of the chargeable interest. This 70% is the same share that was previously owned by Partners E and F together.

However, the calculation of the sum of the lower proportions changes because there is a connection between Partner D and Partner E. In this case, the Sum of Lower Proportions (SLP) is determined not just by how much Partner D owned before the transfer but also by how much Partner E owned because they are connected through marriage. As a consequence, the sum of the lower proportions for this scenario is 60%, as noted in SDLTM33770.

As a result of these calculations, the portion of the property’s market value that counts towards SDLT consideration is determined this way:

• Market Value Chargeable = 100% – 60% = 40%.

This means that 40% is the amount of chargeable interest that Partner D and Partner E did not own before the transfer. Additionally, this amount matches the percentage of the chargeable interest that Partner F owned prior to the transfer because Partner F holds a 40% share in the partnership.

Understanding these connections and calculations is essential for accurate SDLT assessments, especially when properties and partnerships are involved in transfers.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM33740 – Sum of the lower proportions – Para20. Example 2

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