Read the original guidance here:
HMRC SDLT: Transfer of Property to Company X: Stamp Duty Land Tax Example

Guidance on SDLTM33870 – Transfer of Chargeable Interest from a Corporate Partnership – Example 3

This article provides a detailed explanation of transfer processes in a partnership composed entirely of corporate entities. It breaks down the steps that need to be followed to understand how stamp duty land tax is applied in these situations.

Understanding Chargeable Interests

A chargeable interest is basically an interest in property that is subject to stamp duty land tax (SDLT). Most property transactions involving land ownership will trigger the need for SDLT payment. In this example, we look at how a property is transferred from a partnership made up entirely of companies.

Overview of the Example

We will work through a situation similar to example 1 noted in SDLTM33850, where the property is transferred to Company X.

Step One: Identify the Relevant Owners

The first step is to identify who the relevant owners are after the property transfer has occurred.

• Company X is a relevant owner. After the transaction, it has a legal right to a part of the chargeable interest in the property.
• Moreover, before the transaction, Company X was connected to one of the partners in the partnership.

In this case, Company X becomes a relevant owner because it directly benefits from the transaction by acquiring the chargeable interest.

Step Two: Find Corresponding Partners

The next step involves identifying any partner or partners that correspond to the relevant owners. This step is essential to ensure proper compliance with the SDLT regulations.

• Here, there are no corresponding partners to connect with Company X. Though Company A and Company B are part of the partnership, they are not recognised as individuals; rather, they are both corporate bodies.
• Since Company X is not classified as a partner in this scenario, we cannot apply the Step Two test (b).

This absence of partners means the SLP (Standard Land Premium) becomes zero.

Assessing Chargeable Consideration

Next, we need to look at the chargeable consideration related to the transaction. Chargeable consideration refers to the total value that is taken into account when determining the SDLT due on the property transfer.

• Lower Proportion: In this case, the lower proportion of chargeable interest is less than 75.
• Regulation Paragraph 24: Since the lower proportion is below this threshold, paragraph 24 does not apply to this transaction.

As a result, the chargeable consideration for the transaction is the full market value of the land being transferred. For this particular example, it is valued at £5 million.

Group Relief Considerations

Another important aspect to consider is the availability of group relief for the transaction.

• Group relief can potentially reduce the SDLT liability for companies that are part of the same group.
• The eligibility for group relief will depend on the partnership’s status and whether the conditions mentioned in paragraph 27 are met.

For more information, refer to SDLTM34360, which provides further guidelines on group relief related to partnerships.

Additional Points to Keep in Mind

Here are a few extra points to consider that might help clarify some areas regarding property transfer between corporate partnerships:

• Ownership Structure: Understanding the structure of ownership within the partnership is key in determining who is entitled to what once a transfer is made.
• Market Value Determination: It’s important to get an accurate assessment of the market value of the property. An independent valuation is often helpful for this purpose.
• Documentation: Ensure all documentation about the ownership structure and the transaction is kept ready for HMRC review if needed.

Common Questions

Here are some typical questions that arise from this type of transfer:

• What happens if there is a dispute over ownership? It is advisable to resolve disputes before proceeding with any transfers to avoid complications in SDLT calculations.
• Can SDLT be reclaimed? Under certain conditions, SDLT may be reclaimed, and it’s best to consult related regulations or a tax adviser for this.
• What if only part of the interest is transferred? In such cases, the SDLT liability may be lower, and it is essential to re-evaluate the consideration based on the percentage of interest transferred.

Understanding these aspects and following the outlined steps will help clarify how SDLT applies to property transfers between corporate entities within a partnership.

For specific queries related to your situation, always consult the official guidance or a tax professional to ensure compliance and correct SDLT submissions.