HMRC SDLT: SDLTM33750 – Sum of the lower proportions – detailed provisions
Principles and Concepts of SDLTM33750
This section of the HMRC internal manual provides detailed provisions on the sum of the lower proportions. It outlines the principles and concepts relevant to tax calculations and compliance.
- Explains the calculation methods for lower proportions.
- Details the applicable tax regulations and guidelines.
- Offers guidance on compliance with HMRC standards.
- Includes examples for practical understanding.
- Updated regularly to reflect current tax laws.
Read the original guidance here:
HMRC SDLT: SDLTM33750 – Sum of the lower proportions – detailed provisions
Understanding SDLTM33750 – Sum of the Lower Proportions – Detailed Provisions
This article explains how to calculate the sum of the lower proportions for certain transactions involving chargeable interests, as outlined in para 20 of the relevant guidance. Follow these steps carefully to determine the appropriate amounts.
Step One: Identify the Relevant Owner(s)
The first step is to determine who the relevant owner or owners are for the transaction. A relevant owner is defined as someone who:
- Is entitled to a proportion of the chargeable interest immediately after the transaction.
- Was either a partner or closely connected to a partner right before the transaction took place.
Step Two: Identify Corresponding Partner(s)
- Was a partner right before the transaction.
- Was either the relevant owner or someone closely connected to the relevant owner prior to the transaction.
If there is no relevant owner with a corresponding partner, then the sum of the lower proportions is zero.
Step Three: Determine Proportion of Chargeable Interest
Next, take each relevant owner and find out the proportion of the chargeable interest they are entitled to immediately after the transaction. Then, you need to:
- Apportion this proportion among one or more of the corresponding partners of that relevant owner.
There is no specific method mandated for this apportionment. It can be done in the way that is most beneficial for the parties involved.
Step Four: Calculate Lower Proportion for Corresponding Partners
Now, you are required to calculate the lower proportion for each corresponding partner related to one or more relevant owners. The lower proportion is identified as follows:
- The proportion of the chargeable interest attributable to the partner, or
- If this lower, the share of the partnership attributable to the partner.
To ascertain the proportion of the chargeable interest for each partner:
- If the partner is a corresponding partner to just one relevant owner, take the proportion allocated to them (from Step Three).
- If they are linked with more than one relevant owner, sum up the proportions attributed to the partner from each relevant owner in Step Three.
Step Five: Sum the Lower Proportions
Add together all the lower proportions of persons who serve as corresponding partners in relation to one or more relevant owners. The total from this calculation will give you the final sum of the lower proportions.
Important Notes
According to Paragraph 20(2), if individuals hold a chargeable interest as beneficial joint tenants, they will be regarded as holding that interest as beneficial tenants in common, dividing it equally.
Furthermore, under Paragraph 20(3), a company may be treated as an individual who is connected with the relevant owner if it:
- Acts as a trustee holding property.
- Is connected to the relevant owner solely because of the stipulations in section 1122(6) of the Corporation Tax Act 2010.
These steps and notes will guide you in calculating the sum of the lower proportions accurately, following the established procedures set out in the legislation.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM33750 – Sum of the lower proportions – detailed provisions
I am here to help. I offer free expert advice to help you understand your land tax obligations, rights, and entitlements.
