Example of Chargeable Interest Transfer in Corporate Partnership with Group Relief Details

SDLT when property is transferred from a corporate partnership

When land is moved out of a partnership made up only of companies, SDLT is not always charged on the full market value. In HMRC’s example, Company A and Company B each own 50% of the partnership, but after the transfer Company B owns the whole property. The rules compare Company B’s 100% share of the land after the transfer with its 50% partnership share before it, use the lower figure of 50%, and charge SDLT on 50% of the market value, which is £2.5 million on a £5 million property.

• Special partnership rules in Schedule 15 Finance Act 2003 can reduce the SDLT charge when land is transferred from a corporate partnership.
• In this example, Company B is the relevant owner because it was a partner before the transfer and owns the land after it.
• The calculation uses the lower of the post-transfer land share and the pre-transfer partnership share, which here is 50%.
• Because the total lower proportion is 50%, which is below the 75% threshold, paragraph 24 does not apply and SDLT is charged on 50% of market value.
• On a property worth £5 million, the chargeable consideration is therefore £2.5 million rather than the full £5 million.
• After working out the partnership rules, it may still be necessary to consider separate reliefs such as SDLT group relief.

Scroll down for the full analysis.

SDLT on property transferred from a corporate partnership: how Example 2 works

This page explains an HMRC manual example about Stamp Duty Land Tax when land is transferred out of a partnership made up entirely of companies. The example matters because the SDLT charge is not worked out in the ordinary way. Instead, special partnership rules can reduce the taxable amount by looking at who owned the partnership before the transfer and who owns the property after it.

What this rule is about

Where a partnership holds a chargeable interest in land and that land is transferred to a partner or another person connected with the partnership structure, the SDLT rules do not always tax the full market value. Special rules in Schedule 15 to Finance Act 2003 can apply.

This example deals with a partnership consisting wholly of bodies corporate. In that setting, the legislation uses a multi-step calculation to decide whether the normal market value charge is reduced, and if so by how much.

The key issue is whether enough of the economic ownership has stayed with the same party. If it has, the chargeable consideration may be reduced. If not, the full market value rule may apply.

What the official source says

The HMRC example assumes the same facts as the previous example, except that Company A and Company B each have a 50% interest in the partnership.

After the transfer, Company B is entitled to the whole of the chargeable interest. Because Company B was a partner immediately before the transaction and is entitled to a share of the land immediately after it, it is a relevant owner.

For Company B, the corresponding partner is Company B itself. The manual notes that Company A cannot be a corresponding partner because it is not an individual. That point reflects the way the statutory matching exercise works in this particular rule.

Company B is entitled to 100% of the land after the transfer, so that whole proportion is attributed to Company B at the relevant step.

The next step compares two percentages for Company B:

• its proportion of the chargeable interest after the transfer: 100%
• its partnership share before the transfer: 50%

The lower of those two figures is 50%.

Because there is only one lower proportion to add up, the total is 50%. The manual then applies the statutory threshold: because 50 is less than 75, paragraph 24 does not apply. The result is that the chargeable consideration is 50% of market value. On the figures used in the example, that is £2.5 million.

The manual then adds that, because the companies are in the same group, group relief under Schedule 7 Finance Act 2003 may also be available, as modified by the partnership provisions.

What this means in practice

The practical effect is that SDLT is not charged on the full value of the property just because the land has moved from the partnership to Company B.

Instead, the rules ask how much of the ownership can still be traced to the same participant. Company B had a 50% interest in the partnership before the transfer, but owns 100% of the land afterwards. The rules only give credit for the lower figure, so only 50% of the market value is left outside the SDLT charge. The remaining 50% is treated as chargeable consideration.

That is why the taxable amount is £2.5 million rather than the full £5 million market value assumed in the example.

The 75% threshold is critical. If the total of the lower proportions had been 75% or more, paragraph 24 would have applied instead. In this example it does not, because the total is only 50%.

The example also shows that the partnership rules are only part of the analysis. Even where they produce a market value charge, reliefs such as group relief may still need to be considered separately.

How to analyse it

If you are dealing with a transfer of land from a corporate partnership, a sensible approach is:

• Identify who owned the partnership interests immediately before the transfer.
• Identify who is entitled to the land immediately after the transfer.
• Work out who counts as a relevant owner under the statutory test.
• For each relevant owner, identify the corresponding partner or partners required by the legislation.
• For each corresponding partner, compare the post-transfer share of the land with the pre-transfer partnership share.
• Take the lower figure for each person and add those lower proportions together.
• Check whether the total is below 75% or at least 75%, because that determines whether paragraph 24 applies.
• Then consider whether any separate SDLT relief, such as group relief, may still be available.

The main practical question is whether the transfer represents a real shift in economic ownership away from the old partnership proportions. The bigger that shift, the more likely it is that SDLT will be charged on a larger part of market value.

Example

Illustration: a partnership owns land worth £5 million. The partnership has two corporate members, Company A and Company B, each entitled to 50%.

The land is transferred so that Company B owns it outright after the transaction.

Company B is the relevant owner. Its post-transfer share of the land is 100%. Its pre-transfer partnership share was 50%.

The lower figure is 50%. Because the total lower proportion is below 75%, the full paragraph 24 rule does not apply. The chargeable consideration is therefore 50% of market value, which is £2.5 million.

If Company A and Company B are in the same SDLT group, it is then necessary to consider separately whether group relief can reduce or eliminate the SDLT charge, subject to the modified rules that apply in the partnership context.

Why this can be difficult in practice

These rules are technical and highly dependent on the exact statutory definitions. Small changes in the ownership structure can change the answer.

In particular, difficulty often arises over:

• who counts as a relevant owner
• who can be treated as a corresponding partner
• the exact partnership shares immediately before the transfer
• the exact entitlement to the land immediately after the transfer
• whether another relief, such as group relief, is available after the partnership calculation has been done

The HMRC manual example gives the result for a specific fact pattern. It is helpful as an illustration, but the legal answer in a real case depends on applying the legislation to the actual ownership and entitlement positions at the relevant times.

Key takeaways

• When land is transferred from a partnership of companies, SDLT may be charged on only part of market value rather than all of it.
• The calculation compares post-transfer ownership of the land with pre-transfer partnership shares and uses the lower proportion.
• Even after the partnership rules are applied, separate reliefs such as group relief may still need to be considered.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example of Chargeable Interest Transfer in Corporate Partnership with Group Relief Details

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