Deemed Market Value Rules for Partnerships Involving Connected Companies Explained

SDLT partnership rules overriding connected-company market value rules

When a land transaction involves a partnership and also appears to trigger the general SDLT market value rule for connected companies, the partnership rules in Schedule 15 of Finance Act 2003 take priority. If the transaction falls within paragraph 10 or paragraph 18 of Schedule 15, those rules decide the chargeable consideration instead of section 53 market value substitution.

• SDLT is normally based on the actual consideration, but section 53 can replace that with market value where a connected company is involved.
• Partnership transactions have their own specialist SDLT code in Schedule 15, including separate rules for working out consideration.
• If a transaction falls within both section 53 and paragraph 10 or paragraph 18 of Schedule 15, the Schedule 15 rules override section 53 for calculating consideration.
• This does not make section 53 irrelevant in all partnership cases; it only means Schedule 15 wins where the rules overlap.
• In practice, the first step is to decide whether the transaction is within the partnership code before applying any general market value rule.

Scroll down for the full analysis.

SDLT and partnerships: when market value rules involving connected companies are overridden by partnership rules

This page explains a narrow but important SDLT point. It deals with what happens where a land transaction involving a partnership also falls within the general SDLT rule that can substitute market value for the actual price because a connected company is involved. The key practical message is that, if both sets of rules apply, the partnership rules in Schedule 15 take priority in deciding the chargeable consideration.

What this rule is about

SDLT is usually charged by reference to the chargeable consideration given for a land transaction. In many cases, that means the actual price or other value given.

But SDLT also contains special rules for situations where the parties are connected, or where a company connected with a buyer or seller is involved. One such rule is in Finance Act 2003 section 53. Broadly, that provision can require a transaction to be treated as taking place at market value rather than at the stated consideration.

Partnership transactions are different. They are subject to a separate and highly specialised code in Schedule 15 to Finance Act 2003. That code includes its own rules for working out the consideration on certain transfers involving partnerships and partners.

The issue addressed here is what happens when both regimes appear to apply at the same time.

What the official source says

The HMRC manual states that section 53 is relevant in the partnership context because a transaction may fall both within section 53 and within paragraph 10 or paragraph 18 of Schedule 15.

Where that happens, the Schedule 15 legislation takes priority. In other words, if the transaction is within both:

• the deemed market value rule in section 53, and
• the partnership consideration rules in paragraph 10 or paragraph 18 of Schedule 15,

it is the Schedule 15 rules that determine the chargeable consideration.

The source also points the reader to HMRC’s principal guidance on section 53, and to a further example showing how the interaction works.

What this means in practice

This matters because the amount treated as chargeable consideration can be very different depending on which rule applies.

If section 53 applied on its own, the transaction might be taxed on the market value of the land, even if the actual amount paid was lower or nil.

If the transaction instead falls to be analysed under the relevant Schedule 15 partnership rule, the consideration is worked out using the partnership code. That can produce a different result from a simple market value substitution.

So the practical order of analysis is important. In a partnership case, you should not assume that the general connected-company market value rule is the final answer. First ask whether the transaction is one to which paragraph 10 or paragraph 18 of Schedule 15 applies. If it is, those provisions take precedence for determining consideration.

This is not the same as saying section 53 is irrelevant in all partnership cases. The point is narrower: where there is an overlap, Schedule 15 governs the computation of consideration.

How to analyse it

A sensible way to approach the issue is:

• Identify the transaction. Is land being transferred to or from a partnership, or otherwise in a way that engages the special partnership SDLT rules?
• Check whether the transaction falls within paragraph 10 or paragraph 18 of Schedule 15. Those are specific partnership provisions and must be considered on their own terms.
• Separately ask whether section 53 would also apply because of the involvement of a connected company.
• If both apply, use Schedule 15 to determine the chargeable consideration. Do not replace that result with a section 53 market value figure.
• Keep the legal basis clear. The conclusion comes from the priority of the Schedule 15 code in overlapping cases, not from section 53 ceasing to exist.

The key question is not simply whether there is a connected company. It is whether the transaction is one for which the partnership code provides its own rule for consideration.

Example

Illustration only: suppose land is transferred in a transaction involving a partnership, and one of the parties is a company connected with another party to the arrangements. On a standalone view, section 53 might suggest that market value should be used.

But if the transfer is also within paragraph 10 or paragraph 18 of Schedule 15, the consideration must be worked out under the relevant partnership provision instead. The SDLT calculation is therefore driven by the partnership code, not by a direct substitution of market value under section 53.

Why this can be difficult in practice

The source material is brief because it assumes the reader already understands both section 53 and the Schedule 15 partnership regime. In practice, that is where the difficulty lies.

Partnership SDLT rules are technical and are not simply an extension of the ordinary SDLT rules. It is easy to spot a connected-company issue and jump straight to market value. That can be wrong if the transaction sits within the partnership code.

Another difficulty is that the source does not restate the conditions for paragraph 10, paragraph 18, or section 53. So the real work is in classifying the transaction correctly before deciding which rule has priority.

The main point of judgement is therefore at the earlier stage: does the transaction genuinely fall within the relevant Schedule 15 provision? If it does, the official position is clear that Schedule 15 takes priority in determining consideration.

Key takeaways

• Section 53 can deem market value where a transaction involves a connected company, but that is not always the final SDLT answer in partnership cases.
• If a transaction falls within both section 53 and paragraph 10 or paragraph 18 of Schedule 15, the Schedule 15 partnership rules take priority.
• In practice, the critical step is to decide first whether the transaction is within the relevant partnership code before applying any general market value rule.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Deemed Market Value Rules for Partnerships Involving Connected Companies Explained

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