Stamp Duty on Form 17 split?

Stamp Duty on Form 17 split?

9:24 AM, 17th March 2021, About 3 years ago 19

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Quick query about stamp duty. My wife and I own 4 properties 50/50 as tenants in common. We have a partnership (not an LLP) i.e. our self-assessments show income from partnership to declare this property income.

We want to keep the ownerships as 50/50 but want to split the partnership to 80/20 so take advantage of my wife’s lower tax rate. I’ve heard that a form 17 is the way to go, but also hear that stamp duty would be payable. The properties are all mortgaged.

Would stamp duty be payable and why?

Many thanks


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Mark Alexander - Founder of Property118

11:19 AM, 17th March 2021, About 3 years ago

Form 17 does not apply to Partnerships.

According to HMRC’s Partnership Manual :

There are few restrictions on who can be a partner.


It is not a requirement of a partnership that each member is physically capable of performing the full range of the activities of the partnership business, but each must be capable of performing a part of the activities, even if that role is only to provide finance. A partner who plays no active part in the business but has contributed capital is often described as a ‘sleeping partner’.

Spouses and civil partners can enter into partnership with each other. Sometimes this is done for tax planning reasons as it may be advantageous for a person to share their business profits with his or her spouse to maximise the use of their personal allowances and basic rate tax bands. HMRC is unlikely to challenge such an arrangement.

According to HMRC’s Partnership Manual

A spouse or civil partner is sometimes taken into partnership wholly or mainly to maximise the benefit of the tax reliefs that are available.

You cannot challenge the apportionment of profits, as you can a wage, by reference to the value of the partners’ contribution to the firm’s activity. It may be possible in these cases to challenge the spouse or civil partner’s status as a partner, but such a challenge can be difficult to sustain. It is sometimes overlooked that there is no need for the spouse or civil partner to contribute capital; or to participate in management; or, in a trading context at least, to be capable of performing the main activity of the business. Indeed to be a partner one need not take an active part in the business at all. Where the spouse or civil partner has signed a deed declaring an intention to carry on the business and the deed gives a right to share in the profits, and subsequently the accounts of the business show that that person has been allocated a share of the profits, there will not usually be much chance of mounting a successful challenge.

It is worth emphasising that a partnership is not a sham merely because it is set up to save tax, as indeed the spouse or civil partner who is deserted by a partner leaving them to meet the firm’s liabilities may at their own cost. There will always of course be some cases which will be worth investigating and challenging, but these are more likely to be found among those where there is no current partnership deed, and particularly where there is a clear attempt to antedate the setting up of a partnership by more than a few months.


11:22 AM, 17th March 2021, About 3 years ago

A Partnership, which you already have, separates OWNERSHIP from MANAGEMENT from REWARD. You can decide who does what and who gets the reward. A good accountant will minimise your tax liability by allocating reward inthe most cost effective manner. You may like to consider forming a limited Liability Partnership or incorporate into a Limited Company to avoid section 24 tax.


11:34 AM, 17th March 2021, About 3 years ago

Do you have an actual partnership as in the income taxed Schedule D Case I/II, of the property income is taxed in the normal way (historical Schedule A). Not sure how you can be treated as a trade/profession if not developing the property.


17:30 PM, 17th March 2021, About 3 years ago

There would be no SDLT on a form 17, as all you are doing is allocating the beneficial ownership, not transferring the legal ownership. The form 17 needs to accompanied by a declaration of trust. Remember that the allocation will apply to CGT as well as Income Tax.

Mark Alexander - Founder of Property118

19:12 PM, 17th March 2021, About 3 years ago

Reply to the comment left by Olls63 at 17/03/2021 - 17:30
Not for Partnerships


20:13 PM, 17th March 2021, About 3 years ago

Unless it is a property development company it will not be treated as a partnership, as it it not considered a trade or a profession. The properties will be deemed to be owned 50/50.

Mark Alexander - Founder of Property118

21:45 PM, 17th March 2021, About 3 years ago

Reply to the comment left by Olls63 at 17/03/2021 - 20:13

I disagree. It is quite permissible for a Partnership to be a Property Investment Business without being a trading business.

See HMRC's definition of a Property Investment Business at

"Who carries on a rental business?

Any person or body of persons carries on a rental business if:

they own or have an interest in land or property in the UK; and

they enter into transactions that produce rents or other receipts liable to IT or CT from that land or property.
The list of those who carry on a rental business includes individuals, partners, trustees, personal representatives, trustees in bankruptcy, and non-resident companies subject to IT on their income from property. For more about trusts see PIM1045.

A person will carry on a rental business even if they engage an agent to handle it for them. The person carries on the business through the agent."


"Running a property business

You have to pay Class 2 National Insurance if your profits are £6,475 a year or more and what you do counts as running a business, for example if all the following apply:

being a landlord is your main job
you rent out more than one property
you’re buying new properties to rent out
If your profits are under £6,475, you can make voluntary Class 2 National Insurance payments, for example to make sure you get the full State Pension.

You do not pay National Insurance if you’re not running a business - even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements."


QUOTE ONE - ".... there are the factors that point to the activities involved being broadly what you would expect in a business:

Is there a “serious undertaking earnestly pursued” or a “serious occupation”

Is there an occupation or function actively pursued with reasonable or recognisable continuity?

Is there a certain amount of substance in terms of turnover?

Are the activities conducted in a regular manner and on sound and recognised business principles?

Are they of a kind which, subject to differences of detail, are commonly made by those who seek to profit by them

An important additional factor is the extent of the activities. "

QUOTE TWO - "You should accept that incorporation relief will be available where an individual spends 20 hours or more a week personally undertaking the sort of activities that are indicative of a business. Other cases should be considered carefully."


21:55 PM, 17th March 2021, About 3 years ago

Reply to the comment left by Mark Alexander at 17/03/2021 - 21:45
I don't disagree with what you are saying but see PIM 1030 "It is not enough to constitute a partnership that property is jointly owned or that the joint owners receive a share in the rents derived from it (Section 2 Partnership Act 1890). For there to be a partnership there must be a business. This is defined in Section 45 Partnership Act 1890 as including ‘every trade, occupation or profession’ and is a wider concept than ‘trade’. Griffiths v Jackson [1982] 56TC583 suggests that letting property may sometimes be a business.

Most cases of jointly owned property will fall short of the degree of business organisation needed to constitute a partnership. To accept that a partnership exists you would have to be satisfied that there is a similar degree of business organisation as in an ordinary commercial business. This means more than treating rental income as derived from a business of letting property - it must be business apart from that. See also the general guidance on the nature of partnerships at [### Jointly owned property

Where property is owned jointly with one or more other persons the way the rental income is taxed depends on whether the letting is carried on in partnership. Joint letting does not, of itself, make the activity a partnership.

Usually, there won’t be a partnership and the customer’s share from the jointly owned property will be included as part of their personal rental business profits."


22:08 PM, 17th March 2021, About 3 years ago

It is also worth looking at Neil Patterson's comment from 24.01.17 when talking about whether being a landlord is classed as self-employment.
"However, to be considered self employed and running a business a landlord must be involved in more than the basics of maintaining an investment such as: finding a tenant, issuing an AST, collecting rent and managing property maintenance and repairs etc

To be considered self employed and have to pay Class 2 National insurance you would need to offer additional services to tenants over and above the basic rental agreement like laundry or cleaning etc."

Mark Alexander - Founder of Property118

22:14 PM, 17th March 2021, About 3 years ago

Reply to the comment left by Olls63 at 17/03/2021 - 21:55
I cannot dispute what PIM1030 says, but in my opinion the words "most cases of jointly owned property" should be applied to the vast majority of landlords who only own one or two properties.

It could be argued that hat's where the "degree of business" tests are relevant, but there are additional factors to consider.

Do you agree that an Limited Company which owns just one rental property is a business?

On the same basis, is an LLP that owns one rental property both a business and a Partnership? If not, what is it registered as at Companies House and why is registration applicable or even allowable?

Stretching that point, if you do agree with the above, why can't two persons who jointly own just one property at the moment be a business and at what point do two or more people who own more than one rental properties become a business? If we go by PIM1020 and the Partnership Act 1890 and the NIC manuals, then PIM1030 must be an incorrect interpretation of the legislation by HMRC.

Do you agree?

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