Read the original guidance here:
HMRC SDLT: SDLTM34200 – Special provisions relating to partnerships: Application of Exemptions and Reliefs – Para 25(2)

Special Provisions Relating to Partnerships: Application of Exemptions and Reliefs – SDLTM34200

In this section, we will explore how specific tax rules apply to partnerships when dealing with stamp duty land tax (SDLT). Partnerships are groups of individuals or entities who work together for a common purpose. There are important rules regarding how exemptions and reliefs are applied to partnerships, which we will explain in detail.

Overview of SDLTM34210

This part outlines the main ideas underlying SDLT exemptions and reliefs specific to partnerships. Understanding these points helps clarify how partnerships can benefit from tax reliefs available under UK law.

• Partnerships Can Claim Relief: Partnerships have the opportunity to claim various tax reliefs on approved transactions.
• Types of Relief: The reliefs that may apply include Disadvantaged Areas Relief, Charities Relief, and Group Relief. Each of these reliefs has its own guidelines and conditions for eligibility.
• Documentation and Application: To properly apply for these reliefs, partnerships must keep detailed records of their transactions and adhere to specific filing procedures.

Example 1: SDLTM34220

Let’s consider a practical example to illustrate how these principles work. Imagine a partnership consisting of four people who intended to buy a commercial property located in a disadvantaged area. Due to their location, they might qualify for Disadvantaged Areas Relief. This means they could pay a lower rate of SDLT on their purchase compared to other areas.

Example 2: SDLTM34230

In another scenario, suppose a charity partnership acquires a building for its operations. This partnership should check whether it qualifies for Charities Relief. If eligible, this relief can significantly reduce or even eliminate their SDLT liability arising from the purchase.

Application of Disadvantaged Areas Relief – SDLTM34240

The Disadvantaged Areas Relief provides a means for partnerships situated in less economically developed regions to receive SDLT relief. Here’s how it breaks down:

Key Points:

• Definition of Disadvantaged Area: These are regions identified by the government as needing economic support.
• Eligibility Criteria: To qualify, at least some of the land purchased must be situated in a designated disadvantaged area.
• Relief Amount: The extent of relief can depend on the specific area and the purchase price of the property.

Land Wholly Situated in a Disadvantaged Area – SDLTM34250

This section discusses when all of the land purchased by the partnership is located entirely within a disadvantaged area. In such cases, the partnership may qualify for full relief from SDLT on the property.

Example:

If a partnership buys a parcel of land solely located in a disadvantaged area for £300,000, they could benefit from paying significantly less SDLT or none at all. This financial benefit can enhance the partnership’s cash flow and support further development within the community.

Land Partly Situated in a Disadvantaged Area – SDLTM34260

In situations where only part of the acquired land is in a disadvantaged area, different rules apply. The partnership can still claim some relief, but they must calculate how much of the land qualifies.

Calculation Framework:

• Proportion of Land: If, for example, half of the purchased land is in a disadvantaged area, the relief might apply only to that portion.
• Price Assessment: The cost attributed to the part of the land in the disadvantaged area needs to be calculated to determine the relief accurately.

Disadvantaged Areas Relief – Example 1 – SDLTM34270

For a clearer understanding, let’s look at a simple calculation. A partnership buys land for £500,000, with 60% (or £300,000 worth) located in a designated disadvantaged area and 40% outside it.

• Total Purchase Price: £500,000
• Value in Disadvantaged Area: £300,000

The partnership might then only have to pay SDLT on the remaining £200,000, effectively reducing its tax burden.

Disadvantaged Areas Relief – Example 2 – SDLTM34280

In a different example, suppose the partnership acquires a mixed-use property for £1 million. Of this property, only 30% is situated in a disadvantaged area. Here’s how it can break down:

• Amount Within Disadvantaged Area: £300,000
• Remaining Amount: £700,000 will be subject to the full SDLT rates.

This demonstrates how partnerships can manage their SDLT liabilities effectively by understanding the geography of their acquisitions.

Application of Charities Relief – SDLTM34300

Charities Relief is available to partnerships that operate as charitable organisations, which can lead to significant SDLT savings.

Eligibility Criteria:

• Charitable Purpose: The property purchased must be used for charitable activities.
• Type of Partnership: The partnership should be legally recognised as a charity or formed by charitable purposes.

Charities Relief – Example – SDLTM34310

Consider a partnership that focuses on social welfare and is buying a community centre. If they acquire the property for £400,000, they should check if they qualify for Charities Relief, potentially allowing them to pay no SDLT if they meet the necessary criteria. This can free up funds to further their charitable mission.

Application of Group Relief – SDLTM34350

The Group Relief regime allows partnerships that are part of a corporate group to claim relief from SDLT for certain transactions.

Key Aspects of Group Relief:

• Group Structure: Only partnerships that are members of a corporate group can take advantage of this relief.
• Type of Transaction: Group Relief typically applies to acquisitions made within the group.

Partnerships should be mindful of their group status, as this will affect eligibility for tax relief on land purchases.