Overview of Para 18: Transfer of Chargeable Interest from Partnerships to Partners or Connected Persons
When SDLT paragraph 18 applies to property leaving a partnership
Paragraph 18 is a special SDLT rule for transfers of land or other chargeable interests out of a partnership. It can apply where the property goes to a current partner, a former partner, or someone connected with them, so you must check the partnership rules rather than relying only on the normal SDLT rules for ordinary property transfers.
- Paragraph 18 only applies if the asset being transferred is a chargeable interest for SDLT purposes.
- You must check whether the transfer is legally treated as coming from the partnership under paragraph 37, not just look at the wording of the transfer document.
- The rule can cover transfers to current partners, former partners, and people connected with current or former partners.
- Whether someone is connected must be tested under the specific statutory rule in paragraph 39, not by general assumptions about family, business, or commercial links.
- If paragraph 18 applies, the SDLT position must be worked out under the wider partnership rules in Part 3, and not simply under the usual SDLT rules for a sale or transfer.
Scroll down for the full analysis.
Read the original guidance here:
SDLT partnerships: when paragraph 18 applies to transfers out of a partnership
This page explains when the special SDLT rule in paragraph 18 can apply to land or other chargeable interests transferred out of a partnership. The point matters because transfers involving partnerships are not always taxed in the same way as ordinary property sales. If land moves from a partnership to a partner, former partner, or a connected person, you may need to consider the partnership rules rather than only the general SDLT rules.
What this rule is about
Partnerships have their own SDLT regime for certain land transactions. Paragraph 18 is part of that regime. It deals with a transfer of a chargeable interest from a partnership to particular people linked to the partnership.
The key legal issue is whether the transfer is one that falls within paragraph 18 at all. If it does, the transaction has to be analysed under the partnership provisions in Part 3, rather than assuming it is just a straightforward transfer at market value or for stated consideration.
The rule is aimed at cases where property leaves the partnership and goes to someone with a close relationship to the partnership, either because they are or were a partner, or because they are connected with such a person.
What the official source says
The official material says paragraph 18 applies where a chargeable interest is transferred:
- from a partnership to a person who is or has been one of the partners, or
- from a partnership to a person connected with a person who is or has been one of the partners.
The source also makes two linked points:
- whether there has been a transfer from a partnership is determined under paragraph 37, and
- whether a person is connected for these purposes is determined under paragraph 39.
So paragraph 18 does not stand alone. Before deciding that it applies, you need to answer two earlier questions: is the transfer legally treated as coming from the partnership, and is the recipient within the relevant class of persons?
What this means in practice
In practice, you should not look only at the transfer document and ask who the named transferor and transferee are. The SDLT partnership code has its own rules for deciding when property is treated as being transferred from a partnership. That is important because the tax analysis may depend on the statutory treatment of the transaction, not just its commercial description.
The rule covers two broad situations:
- the partnership transfers land to a current or former partner;
- the partnership transfers land to someone connected with a current or former partner.
The inclusion of former partners matters. A person does not fall outside the rule simply because they had ceased to be a partner before the transfer took place.
The connected-person limb also matters. A transfer to a relative, company, trustee, or other person may still fall within paragraph 18 if the statutory connection test is met. Whether that is so depends on the specific connection rules in paragraph 39, not on a general impression that the parties are associated.
How to analyse it
A sensible way to approach the issue is to work through these questions in order.
Is there a chargeable interest?
Paragraph 18 only matters if what is being transferred is a chargeable interest for SDLT purposes.
Is the transfer treated as being from a partnership?
This is not just a factual question. The source points to paragraph 37 for the circumstances in which a chargeable interest is transferred from a partnership. You need to apply that statutory rule.
Who is receiving the interest?
Check whether the recipient is:
- a current partner,
- a former partner, or
- connected with a current or former partner.
If connection is relevant, does the statutory connection test apply?
The source points to paragraph 39 for the definition. You should use that specific rule rather than assuming that ordinary language or accounting concepts of connection are enough.
If paragraph 18 applies, what do the wider partnership rules do to the SDLT calculation?
This page is only an overview of when paragraph 18 is engaged. The tax outcome will depend on the wider Part 3 rules.
Example
Illustration: A property is held by a partnership. The property is transferred out of the partnership to one of the individuals who used to be a partner in that firm. On these facts, paragraph 18 is potentially in point because the transfer is from a partnership to a person who has been one of the partners.
Another illustration: A partnership transfers a chargeable interest to a company controlled by a current or former partner. Paragraph 18 may apply, but only if the company is connected with that partner under the specific connection rule in paragraph 39.
Why this can be difficult in practice
The source page is only an overview, so the main difficulty is that the real analysis sits elsewhere in the legislation and manual.
Three points commonly need careful attention:
- Whether the property is legally treated as transferred from the partnership. That is a statutory question under paragraph 37, not just a matter of how the parties describe the deal.
- Whether the recipient is a former partner. Historic partnership membership can matter, so the timing of admissions and retirements may be relevant.
- Whether a person is connected under paragraph 39. Connection for Part 3 is a defined concept. It should not be assumed from commercial closeness or family involvement without checking the statutory test.
Because paragraph 18 is only the gateway into the rule, identifying that it applies is not the same as completing the SDLT analysis. The charge, if any, will depend on the rest of the partnership code.
Key takeaways
- Paragraph 18 is about transfers of chargeable interests from a partnership to a current partner, former partner, or a connected person.
- You must check the specific rules on when a transfer is treated as being from a partnership and when a person is connected.
- If paragraph 18 applies, the transaction needs to be analysed under the wider SDLT partnership provisions, not only under the ordinary transfer rules.
This page was last updated on 24 March 2026
Useful article? You may find it helpful to read the original guidance here: Overview of Para 18: Transfer of Chargeable Interest from Partnerships to Partners or Connected Persons
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