REV BN 15 - Stamp Duty Land Tax: Partnership transactions

Who will be affected?

1. Potentially all partnerships owning property, but primarily partnerships involved in property investment.

General description of the measures

2. Stamp Duty Land Tax was introduced from 1 December, largely replacing stamp duty on land transactions. A number of changes were made in December 2003 to clarify points of uncertainty; counter avoidance and extend some reliefs. These new measures will apply Stamp Duty Land Tax to certain partnership transactions which involve an interest in land, and which are currently excluded from the scope of the tax.

Operative date

3. From Royal Assent.

Current law and proposed revisions

4. Currently, Stamp Duty Land Tax applies to most acquisitions of an interest in land situated in the United Kingdom. However, the transfer of an interest in land into a partnership, the acquisition of an interest in a partnership (where the partnership property includes an interest in land) and the transfer of an interest in land out of a partnership, were excluded from Stamp Duty Land Tax. Draft legislation was published on 20 October 2003 and following consultation, these transactions will be brought within the scope of Stamp Duty Land Tax from Royal Assent.

5. Stamp Duty Land Tax will now be charged on the following transactions:

• where an interest in land is transferred into a partnership, either by an existing partner or by a person in exchange for an interest in that partnership. Stamp Duty Land Tax will be chargeable, at the appropriate rate, on a proportion of the market value of that land interest. The proportion will be equal to the proportion of the land interest transferred to the other partners as measured by their partnership;
• where partnership property includes an interest in land and arrangements are in place so that either:
  • an existing partner transfers all or part of their partnership interest, to a person who is or becomes a partner, for money or money’s worth; or
  • a person becomes a partner and an existing partner reduces their partnership share (or ceases to be a partner) and withdraws money or money’s worth from the partnership; then

Stamp Duty Land Tax will be chargeable, at the appropriate rate, on the person acquiring the interest or increased interest, on a proportion of the market value of the land interest so transferred. The proportion will be equal to the increased (or new) partnership share held by the acquiring partner; and

• where a partnership transfers an interest in land to a partner or former partner. Stamp Duty Land Tax will be chargeable, at the appropriate rate, on the person acquiring the interest, on the proportion of the market value of the land interest transferred on which tax (which includes ad valorem stamp duty or, for transactions executed before 20 October 2003, fixed duty) has not previously been paid.

8. The changes will charge only the proportion of the property being transferred into a partnership. This recognises concerns raised, that charging the whole value of the land meant that the part of the land retained (through their partnership share) by the person transferring it, was being brought into the charge to tax unfairly.

Further advice

If you have any questions about these changes please contact the Stamp Taxes Enquiry Line on 0845 603 0135.

www.inlandrevenue.gov.uk