Stamp Duty Implications for Partnerships: Examples of Calculating Liability

Stamp Duty when a new partner joins a partnership owning land and shares

When someone buys into a partnership that owns both land and shares or other marketable securities, Stamp Duty may apply as well as SDLT. The starting point is the amount paid by the new partner, but this is reduced by an “excluded amount” linked to the partnership’s net land value. Any resulting Stamp Duty charge may then be capped so it does not exceed the duty that would have arisen on an equivalent transfer of the partnership’s securities.

• Schedule 15 Finance Act 2003 contains special rules for partnership changes, including a new partner joining for payment.
• The excluded amount is worked out by taking the net market value of the land, after deducting debt secured on it, and applying the share acquired by the incoming partner.
• In HMRC’s example, land worth £1.5 million with a £500,000 secured loan gives a net land value of £1 million, so a 25% share produces an excluded amount of £250,000.
• If the new partner pays £400,000, the Stamp Duty calculation under paragraph 32 is based on £150,000 after deducting the excluded amount, but paragraph 33 then caps the duty at £725 by reference to the value of the partnership’s shares.
• If the payment is only £300,000, the remaining amount after deduction is £50,000, which in HMRC’s example falls below the nil-rate threshold then in force, so no Stamp Duty is due if the instrument includes the right certificate of value.
• In practice, the result depends on the exact assets held, which liabilities are secured on the land, whether any securities would be exempt on a direct transfer, and the Stamp Duty rules in force at the time.

Scroll down for the full analysis.

Stamp Duty on a person joining a partnership that owns land and shares: how the Schedule 15 calculation works

This page explains an HMRC example about what can happen when a new person joins a partnership and pays for a share in it, where the partnership owns both land and shares. In that situation, there may be an SDLT question because the partnership owns land, but there may also be a Stamp Duty question because the partnership owns stocks or marketable securities. The official example shows how to work out the Stamp Duty amount and how a statutory cap can reduce it.

What this rule is about

Schedule 15 to Finance Act 2003 contains special rules for partnerships. Those rules can apply when a person joins a partnership, leaves it, or when partnership shares change.

Where the partnership owns land, the SDLT partnership rules may need to be considered. But if the partnership also owns shares or other marketable securities, the transaction may also bring in Stamp Duty rules under paragraphs 31 to 33 of Schedule 15.

The issue in the HMRC example is not whether SDLT applies in general. It is how to calculate any Stamp Duty charge where a new partner pays money to acquire a share in a partnership that owns both:

• chargeable land interests, and
• stocks or marketable securities.

The legislation tries to avoid charging Stamp Duty on the part of the payment that is really attributable to the land element. That is why the calculation deducts an “excluded amount”.

What the official source says

HMRC’s example applies paragraph 32 of Schedule 15. Under that rule, the Stamp Duty calculation starts with the consideration given by the incoming partner, but then deducts an excluded amount.

The excluded amount is based on:

• the net market value of the chargeable interest in land, and
• the appropriate proportion represented by the partnership share acquired.

In the example, the partnership owns a commercial property worth £1.5 million, subject to a secured loan of £500,000. So the net market value of the land interest is £1 million.

If the incoming partner acquires a 25% partnership share, the excluded amount is 25% of £1 million, which is £250,000.

The Stamp Duty consideration is then:

consideration given minus excluded amount.

In Example 1, the incoming partner pays £400,000. Deducting the excluded amount of £250,000 leaves £150,000 as the Stamp Duty consideration.

HMRC then says that the ordinary Stamp Duty charge on that amount would be worked out under the rates in the legislation then in force, and that a certificate of value can affect the rate used.

However, paragraph 33 imposes a cap. The Stamp Duty actually payable cannot exceed the duty that would have been payable on an equivalent transfer of the partnership’s stocks and marketable securities themselves.

So the calculation must also look at the securities owned by the partnership. In Example 1, those securities are worth £580,000. The incoming partner acquires 25%, so the relevant value is £145,000. Duty on that amount at 0.5% is £725.

Because £725 is less than the £1,500 produced by the paragraph 32 calculation, the liability is reduced to £725.

In Example 2, the incoming partner pays only £300,000. After deducting the same excluded amount of £250,000, the Stamp Duty consideration is £50,000. HMRC says that this falls below the nil-rate threshold then applicable, so no Stamp Duty is payable if the instrument includes the relevant certificate of value. Because the result is nil at that stage, there is no need to apply the paragraph 33 cap.

What this means in practice

The practical point is that when someone buys into a partnership, you cannot assume the whole payment is exposed to Stamp Duty just because the partnership owns shares.

You first strip out the part of the payment that is treated as attributable to the land interest. That is the excluded amount. Only the balance is brought into the Stamp Duty calculation under paragraph 32.

Then you check whether paragraph 33 reduces the result. This matters because the paragraph 32 calculation can produce a figure that is higher than the duty that would arise if the relevant securities had simply been transferred directly. Paragraph 33 prevents the Stamp Duty charge from exceeding that amount.

The examples also show that secured debt on the land affects the excluded amount. A mortgage or other secured loan reduces the land’s net market value, which in turn reduces the excluded amount. A smaller excluded amount means more of the incoming partner’s payment may remain within the Stamp Duty calculation.

The examples further show that you need to look carefully at the nature of the securities. HMRC notes that securities which would be exempt on an actual transfer are ignored for the paragraph 33 cap. But HMRC also says there is no territorial limitation for this purpose, so foreign shares are not automatically left out.

How to analyse it

A sensible way to approach this type of case is:

1. Identify whether the partnership owns land, stocks, or marketable securities.
2. Work out whether the transaction is one where the partnership rules in Schedule 15 are in point, such as a new partner joining for consideration.
3. Calculate the net market value of the land interest by taking market value less secured liabilities on that land.
4. Identify the appropriate proportion. If the incoming person was not previously a partner, HMRC’s example treats this as the share acquired.
5. Multiply the net land value by that proportion to find the excluded amount.
6. Deduct the excluded amount from the consideration given. That produces the amount to test for Stamp Duty under paragraph 32.
7. If that produces a charge, check paragraph 33. Ask what duty would have been payable on an equivalent transfer of the relevant chargeable stocks or marketable securities.
8. Ignore securities that would themselves be exempt on a transfer, as HMRC indicates.
9. Compare the two figures. The actual Stamp Duty cannot exceed the paragraph 33 amount.

Questions worth asking include:

• What exactly counts as relevant partnership property at the time of the transaction?
• What debts are secured on the land and therefore reduce net market value?
• What proportion of the partnership is really being acquired?
• Are all the securities of a kind that would be chargeable if transferred directly?
• Does the form of the instrument include any certificate of value required for the rate or nil charge relied on?

Example

Illustration based on the HMRC examples.

A and B are partners. The partnership owns:

• a commercial property worth £1.5 million, with a £500,000 mortgage, and
• shares worth £580,000.

C joins the partnership and pays £400,000 for a 25% share.

Step 1: Calculate net land value.

£1.5 million minus £500,000 = £1 million.

Step 2: Calculate excluded amount.

25% of £1 million = £250,000.

Step 3: Calculate Stamp Duty consideration under paragraph 32.

£400,000 minus £250,000 = £150,000.

Step 4: Work out the duty on that amount under the applicable Stamp Duty rules. HMRC’s example gives £1,500.

Step 5: Apply the paragraph 33 cap.

25% of the shares value of £580,000 = £145,000.

Duty on £145,000 at 0.5% = £725.

Because £725 is lower than £1,500, the Stamp Duty is capped at £725.

Why this can be difficult in practice

These rules are calculation-heavy and depend on the exact facts.

First, the examples assume a straightforward case where a completely new person acquires a fixed percentage of the partnership. Other fact patterns may be less simple, especially if existing partners’ interests change in more complex ways.

Secondly, the treatment of liabilities matters. The example only deducts debt secured on the land when finding the net market value of the chargeable interest. It does not suggest a broader deduction for other partnership debts. The distinction between secured liabilities on land and other liabilities can therefore be important.

Thirdly, the paragraph 33 cap requires a separate analysis of the securities. You need to know which assets are “stocks or marketable securities”, whether any would be exempt if directly transferred, and what duty would then arise. HMRC’s comment about foreign securities is particularly important, because some readers might wrongly assume that only UK securities matter.

Finally, the examples refer to rates, thresholds and certificates of value under the Stamp Duty rules then in force. Those points are highly dependent on the legislation applicable at the time of the instrument. The structural point remains useful, but the exact duty outcome always depends on the law in force for the relevant transaction.

Key takeaways

• When a person buys into a partnership that owns land and shares, Stamp Duty may need to be considered as well as SDLT.
• The incoming partner’s payment is reduced by an excluded amount linked to the net value of the land interest before calculating Stamp Duty.
• Even if paragraph 32 produces a charge, paragraph 33 can cap it at the duty that would arise on an equivalent transfer of the relevant securities.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Stamp Duty Implications for Partnerships: Examples of Calculating Liability

View all HMRC SDLT Guidance Pages Here