SDLT Treatment For Property Partnerships At Incorporation

by Neil Patterson

9:55 AM, 28th June 2017
About A year ago

SDLT Treatment For Property Partnerships At Incorporation

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SDLT Treatment For Property Partnerships At Incorporation

Why is the SDLT treatment of partnership property different to individually owned property at the point of incorporation?

Property118 Limited has raised this very important issue with HMRC in an open latter dated 28th June 2017, the content of which reads as follows: 

This request for clarification is a follow up to our letter dated 20th June which requested clarification of the circumstances by which a private landlord is perceived by HMRC as running a business (copy attached).

Your SDLTM33110 makes it very clear on how SDLT is calculated for partnerships at the point of incorporation. The opening section of your manual states:-

A partnership for the purposes of SDLT is defined as

  • a partnership within the Partnership Act 1890
  • a limited partnership registered under the Limited Partnerships Act 1907
  • a limited liability partnership formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002 or
  • a firm or entity of a similar character to any of the above formed under the law of a country or territory outside the United Kingdom.

In this guidance, unless specified otherwise, the word ‘partnership’ is used generically to refer to any entity that qualifies as a partnership under any of the above definitions.

In each case, a partnership will exist if and only if the entity carries on a ‘business’. HMRC’s guidance on this is set out in the Property Income Manual at PIM1030.

We cannot understand why this applies only to partnerships and not sole owners, or does it?

Are we missing something?

We respectfully request your permission to publish your response to this request for clarification in open forum.

Yours faithfully

Neil Patterson – Managing Director

Please send me a link to the HMRC response

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Comments

Daren Peacock

11:32 AM, 28th June 2017
About A year ago

Partnerships are not exempt from SDLT - its just that the consideration is deemed to be nil in certain circumstances.

Sole proprietors are subject to SDLT on incorporation as they cannot rely on the partnership rules to trump the general market value rule.

All partnerships are businesses but not all businesses are partnerships. They are not synonymous although it would appear HMRC are accepting clearances that certain businesses are partnerships even though not formally constituted.

Craig Rennolds

16:08 PM, 1st June 2018
About 7 months ago

Hi Mark,
I have asked my accountant to form a partnership although my wife and I operate as a partnership anyway and return self assessment forms each year. I have read some information posted by yourself suggesting these may not be a good route to take prior to incorporation? Should I tell her to hold off until we try to incoporate?

Regards,
Craig Rennolds


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