Guide on Partnership Property Transfer to Connected Company and SDLT Implications

SDLT on transfers of partnership property to a connected company

When a partnership transfers property to a company connected with one or more partners, two SDLT rules may seem to apply: the general market value rule for connected companies and the special partnership rules. HMRC’s view is that the partnership rules take priority, so SDLT is charged on the reduced amount worked out under Schedule 15 rather than automatically on full market value.

• If land is transferred to a connected company, FA 2003 section 53 would normally substitute market value for any lower price paid.
• Where the property is partnership property, Schedule 15 has special rules that can reduce the SDLT charge to reflect partners’ existing economic interests.
• HMRC says that if both rules apply, Schedule 15 paragraph 18 overrides section 53 when calculating chargeable consideration.
• In HMRC’s example, a property worth £250,000 transferred for £200,000 was charged by reference to £150,000, not £250,000, because 40% was treated as already economically owned by connected partners.
• The key practical checks are who controls the company, whether attribution rules apply, and what the partners’ relevant profit-sharing proportions are for Schedule 15 purposes.

Scroll down for the full analysis.

SDLT when a partnership transfers property to a connected company: why the partnership rules override the general market value rule

This page explains what happens for SDLT if a partnership transfers land or property to a company that is connected with one or more of the partners. The point matters because two different charging rules can appear to apply at the same time. One is the general market value rule for connected-company transactions. The other is the special SDLT code for partnerships. HMRC’s view in this material is that, where both apply, the partnership rule takes priority in working out the chargeable consideration.

What this rule is about

Normally, if land is transferred to a company and the parties are connected, SDLT may be charged by reference to market value rather than the actual price paid. That is the effect of FA 2003 section 53.

But partnership transactions have their own SDLT rules in Schedule 15 to FA 2003. Those rules are designed to reflect the economic reality that partners may already have an indirect interest in partnership property. When partnership property moves out of the partnership to a partner or to a person connected with a partner, the legislation may charge SDLT only on the part that is treated as moving to a new economic owner.

The issue in this page is the interaction between those two rules. If a partnership transfers property to a connected company for less than market value, should SDLT be charged on full market value under section 53, or on the reduced amount produced by the partnership rules?

What the official source says

HMRC’s example involves a partnership of three individual partners, A, B and C. Their partnership profit shares for Schedule 15 purposes are 60%, 20% and 20%. B and C are married. The partnership transfers a freehold property to company D. B controls D, and C is also treated as controlling D because her husband’s rights are attributed to her when deciding control.

The property is worth £250,000, but D pays only £200,000.

HMRC says that, for these purposes, the vendors are treated as the individual partners. Because B and C are connected with company D, each partner is treated as connected with the company under the connected-person rules as applied for section 53. That means section 53 would, on its own, deem the consideration to be at least market value. On that basis, the chargeable consideration would be £250,000.

However, HMRC then says the transaction also falls within paragraph 18 of Schedule 15, because the transfer is from the partnership to a person connected with one of the partners.

Using the paragraph 20 calculation, the “sum of the lower proportions” is 40. HMRC therefore treats 40% of the market value as already economically owned by B and C, and charges SDLT on the remaining 60% only. So the chargeable consideration becomes 60% of £250,000, which is £150,000.

HMRC’s express conclusion is that where both section 53 and paragraph 18 apply to a transfer of a chargeable interest to a company, paragraph 18 takes precedence in determining the chargeable consideration.

What this means in practice

The practical effect is important. A transfer from a partnership to a connected company is not automatically charged on full market value, even if the company pays less than market value and even if the connected-party rule in section 53 would ordinarily apply.

Instead, you must check whether the special partnership transfer rules apply. If they do, the amount charged to SDLT may be reduced to reflect the partners’ existing economic interests in the property through the partnership.

In HMRC’s example, B and C together already represent 40% of the relevant partnership proportions. So SDLT is charged only on the remaining 60% of the market value. The result is a charge on £150,000 rather than £250,000.

This can make a substantial difference to the SDLT bill. It also means that using the actual price paid may be the wrong starting point. In this type of case, the key comparison is not just price versus market value. It is whether the partnership code displaces the general connected-company market value rule.

How to analyse it

A sensible way to approach a case like this is:

• Identify whether the transfer is of partnership property.
• Identify who the transferor and transferee are in SDLT terms.
• Ask whether the transferee is a partner or a person connected with a partner for Schedule 15 purposes.
• Check whether the general market value rule in FA 2003 section 53 would also apply because the transferee is a connected company.
• If both regimes appear relevant, work through the Schedule 15 calculation, including the relevant partnership profit shares and the paragraph 20 “lower proportions” exercise.
• Apply HMRC’s stated view that paragraph 18 takes precedence over section 53 in determining chargeable consideration for this kind of transfer.

The critical factual questions are usually:

• Who controls the company?
• Are any attribution rules relevant, such as rights attributed between spouses?
• What are the partners’ profit-sharing proportions for Schedule 15 purposes?
• Is the transfer one to a person connected with a partner, rather than to an entirely unconnected person?

Those questions matter because they determine both whether section 53 is in point and whether paragraph 18 applies at all.

Example

Illustration based on HMRC’s example:

A, B and C are partners. Their relevant profit shares are 60%, 20% and 20%. The partnership owns a property worth £250,000. It transfers the property to company D for £200,000. B controls D. C is also treated as controlling D because of the attribution of her husband’s rights.

Step 1: Under the connected-company market value rule, the transfer would be treated as made for £250,000, not £200,000.

Step 2: But the transfer is also from a partnership to a person connected with a partner, so paragraph 18 of Schedule 15 applies.

Step 3: The paragraph 20 calculation gives a total lower proportion of 40.

Step 4: SDLT is charged on 100 minus 40, so 60% of market value.

Step 5: 60% of £250,000 is £150,000.

On HMRC’s approach, £150,000 is the chargeable consideration, even though section 53 on its own would have pointed to £250,000.

Why this can be difficult in practice

The difficulty is not usually the arithmetic. It is deciding which rules are engaged and how the connection tests work.

In particular:

• The connected-person rules can be wider than people expect, especially where company control is attributed between spouses or through other statutory attribution rules.
• The partnership rules depend on specific Schedule 15 concepts, including the relevant profit-sharing proportions. Those are not always the same as a simple commercial understanding of who “owns” what.
• The official material here gives HMRC’s view that paragraph 18 takes precedence over section 53 in this situation. That is a point about interaction between provisions, so it is important to be clear that the conclusion comes from the special partnership regime applying to the same transaction.
• It would be easy to assume that paying below market value to a connected company automatically means SDLT on full market value. This example shows that assumption can be wrong where partnership property is involved.

The analysis is therefore fact-sensitive. Small changes in control, connection, or partnership proportions could change the result.

Key takeaways

• A transfer of partnership property to a connected company may fall within both the general market value rule and the special partnership rules.
• HMRC’s view in this material is that the partnership rule in Schedule 15 paragraph 18 takes precedence over FA 2003 section 53 for working out chargeable consideration.
• Where paragraph 18 applies, SDLT may be charged only on the proportion of market value that is treated as passing beyond the partners’ existing economic interests.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Partnership Property Transfer to Connected Company and SDLT Implications

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