SDLTM33540 | Special provisions relating to partnerships: Transfers of a chargeable interest to a partnership

Example 2

Individual D owns a chargeable interest (again, a freehold property) which he wishes to transfer to a partnership of which he is a member. There are two other partners, individuals E and F. Partner D is not connected [see SDLTM33510] with Partner F for the purposes of part 3, but he is married to Partner E, so is connected with her for the purposes of SDLT.

Partner D is entitled to a 30% share of the income profits of the partnership. Partner E is also entitled to the same share, with partner F being entitled to the balance of 40%.

Here, Partner D has again given up 70% of the chargeable interest: the same interest as has been acquired, through their interest in the partnership, by Partners E and F. The computation of the sum of the lower proportions does not, however, result in the same figure as before, owing to the connection between Partners D and E.

In this instance, the sum of the lower proportions is calculated by reference not only to the proportion owned by Partner D but also by the share owned by his wife. Partners D and E are effectively treated as if they were a single partner in the partnership, with their shares being aggregated. As a result, the sum of the lower proportions is 60 [full calculation at SDLTM33550] and the proportion of the market value of the chargeable interest given up by Partners D and E together is 40%.

The net result is that the proportion of the market value of the chargeable interest taken as consideration for the purposes of SDLT is (100-60)%, that is 40%. This equates to the proportion of the chargeable interest given up by Partners D and E which is, of course, identical to the proportion of the chargeable interest acquired by Partner F through her interest in the partnership.