Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
551

chargeable proportion of the market value of the interest
transferred.
      (5)
If there is no chargeable consideration other than rent—
(a)
there shall (despite that) be taken to be chargeable
consideration other than rent (in particular for the
5
purposes of paragraph 9 of Schedule 5), and
(b)
that chargeable consideration shall be taken to be equal to
the chargeable proportion of the market value of the
interest transferred.
      (6)
Paragraph 18 provides for determining the chargeable proportion.
10
Transfer of interest in land from a partnership: chargeable proportion
18    (1)
The chargeable proportion referred to in paragraphs 16(3) and 17
is—

where PP is the purchaser’s proportion.
      (2)
Paragraph 19 applies for determining the purchaser’s proportion
15
where—
(a)
the effective date of the transfer of the relevant interest in
land to the partnership was before 20th October 2003, or
(b)
the effective date of the transfer of the relevant interest in
land to the partnership was on or after that date and—
20
(i)
the instrument by which the transfer was effected
has been duly stamped with ad valorem stamp duty
under the enactments relating to stamp duty, or
(ii)
tax in respect of the transfer has been duly paid
under this Part.
25
      (3)
Where the effective date of the transfer of the relevant interest in
land to the partnership was on or after 20th October 2003 but
neither of the conditions in sub-paragraphs (i) and (ii) of sub-
paragraph (2)(b) is met, the purchaser’s proportion is zero.
      (4)
The relevant interest in land is—
30
(a)
the interest in land which ceases to be partnership
property as a result of the transaction to which paragraph
16 applies, or
(b)
where the transaction to which paragraph 16 applies is the
grant or creation of an interest in land, the interest in land
35
out of which that interest is granted or created.
19    (1)
Where this paragraph applies, the purchaser’s proportion is
determined as follows:—

Step One

Find the relevant partner’s partnership share on the relevant date.
40

The relevant partner—
(a)
if paragraph 16 applies to the transaction by virtue of
paragraph 16(1)(a), is the purchaser;
(b)
if paragraph 16 applies to the transaction by virtue of
paragraph 16(1)(b), is the person who is or has been one of
45
the partners.

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
552


In a case falling within paragraph 18(2)(a), the relevant date—
(a)
if the relevant partner was a partner on 19th October 2003,
is 19th October 2003;
(b)
if the relevant partner became a partner after that date, is
the date on which he became a partner.
5

In a case falling within paragraph 18(2)(b), the relevant date—
(a)
if the relevant partner was a partner on the effective date of
the transfer of the relevant interest in land to the
partnership, is that date;
(b)
if the relevant partner became a partner after that date, is
10
the date on which he became a partner.

Step Two

Add to that partnership share any increases in the relevant
partner’s partnership share which—
(a)
occur in the period starting on the day after the relevant
15
date and ending immediately before the transaction to
which paragraph 16 applies, and
(b)
count for this purpose.

The result is the increased partnership share.

An increase counts for the purpose of paragraph (b) only if—
20
(i)
where the transfer which resulted in the increase took
place on or before the date on which the Finance Act 2004
was passed, the instrument by which the transfer was
effected has been duly stamped with ad valorem stamp
duty under the enactments relating to stamp duty;
25
(ii)
where the transfer which resulted in the increase took
place after that date, tax in respect of the transfer has been
duly paid under this Part.

Step Three

Deduct from the increased partnership share any decreases in the
30
relevant partner’s partnership share which occur in the period
starting on the day after the relevant date and ending immediately
before the transaction to which paragraph 16 applies.

The result is the purchaser’s proportion.
      (2)
If the effect of applying Step Three would be to reduce the
35
purchaser’s proportion below zero, the purchaser’s proportion is
zero.
      (3)
In a case falling within paragraph 18(2)(a), if the relevant partner
ceased to be a partner before 19th October 2003, the purchaser’s
proportion is zero.
40
      (4)
In a case falling within paragraph 18(2)(b), if the relevant partner
ceased to be a partner before the effective date of the transfer of the
relevant interest in land to the partnership, the purchaser’s
proportion is zero.
      (5)
Paragraph 18(4) (relevant interest in land) applies for the purposes
45
of this paragraph.

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
553

Application of exemptions and reliefs
20    (1)
Where paragraph 10, 12, 15 or 16 applies, paragraph 1 of Schedule
3 (exemption of transactions for which there is no chargeable
consideration) does not apply.
      (2)
But this Part of this Schedule has effect subject to any other
5
provision affording exemption or relief from stamp duty land tax.
Acquisition of interest in partnership not chargeable except as specially provided
21
Except as provided by—
(a)
paragraph 10 (transfer of interest in land to a partnership),
or
10
(b)
paragraph 12 (transfer of partnership interest:
consideration given and interest in land held), or
(c)
paragraph 15 (transfer of partnership interest pursuant to
earlier arrangements),

the acquisition of an interest in a partnership is not a chargeable
15
transaction, notwithstanding that the partnership property
includes land.
Transactions that are not notifiable
22    (1)
A transaction which is a chargeable transaction by virtue of
paragraph 12 or 15 (transfer of partnership interest) is not a
20
notifiable transaction unless the consideration for the transaction
exceeds the zero rate threshold.
      (2)
The consideration for a transaction exceeds the zero rate threshold
if either or both of the following conditions are met—
(a)
the relevant consideration for the purposes of section 55
25
(amount of tax chargeable: general) is such that the rate of
tax chargeable under that section is 1% or higher;
(b)
the relevant rent value for the purposes of Schedule 5
(amount of tax chargeable: rent) is such that the rate of tax
chargeable under that Schedule is 1% or higher.
30
Stamp duty on transfers of partnership interests: continued application
23    (1)
Nothing in section 125 (abolition of stamp duty except in relation
to stock or marketable securities), or in Part 2 of Schedule 20
(amendments and repeals consequential on that section), affects
the application of the enactments relating to stamp duty in relation
35
to an instrument by which a transfer of an interest in a partnership
is effected.
      (2)
In Part 1 of Schedule 20 (provisions supplementing section 125)
references to stock or marketable securities shall be read as
including any property that is the subject-matter of a transaction
40
by which an interest in a partnership is transferred.
      (3)
In their application in relation to an instrument by which a transfer
of an interest in a partnership is effected, the enactments relating
to stamp duty have effect subject to paragraph 24.

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
554

Stamp duty on transfers of partnership interests: modification
24    (1)
This paragraph applies where—
(a)
stamp duty under Part 1 of Schedule 13 to the Finance Act
1999 (transfer on sale) is chargeable on an instrument
effecting a transfer of an interest in a partnership, and
5
(b)
the relevant partnership property includes an interest in
land.
      (2)
The “relevant partnership property”, in relation to a transfer of an
interest in a partnership, is every interest in land held as
partnership property immediately after the transfer, other than
10
any interest that was transferred to the partnership in connection
with the transfer.
      (3)
The consideration for the transaction shall (subject to sub-
paragraph (8)) be taken to be equal to the actual consideration for
the transaction less the excluded amount.
15
      (4)
The excluded amount is a proportion of the net market value of the
relevant partnership property immediately after the transfer.
      (5)
That proportion is—
(a)
if the person acquiring the interest in the partnership was
not a partner before the transfer, his partnership share
20
immediately after the transfer;
(b)
if he was a partner before the transfer, the difference
between his partnership share before and after the transfer.
      (6)
The net market value of an interest in land at a particular date is—

where—
25
MV is the market value of the interest in land at that date,
and
SL is the amount outstanding at that date on any loan
secured solely on the interest in land.
      (7)
If, in relation to an interest in land, SL is greater than MV, the net
30
market value of the interest in land shall be taken to be nil.
      (8)
If the excluded amount is greater than the actual consideration for
the transaction, the consideration for the transaction shall be taken
to be nil.
      (9)
Where this paragraph applies in relation to an instrument, the
35
instrument shall not be regarded as duly stamped unless it has
been stamped in accordance with section 12 of the Stamp Act 1891.
Construction of references to partnership property or partnership share
25    (1)
Any reference in this Part of this Schedule to partnership property
is to an interest or right held by or on behalf of a partnership, or
40
the members of a partnership, for the purposes of the partnership
business.
      (2)
Any reference in this Part of this Schedule to a person’s
partnership share at any time is to the proportion in which he is
entitled at that time to share in the income profits of the
45
partnership.

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
555

Construction of references to transfer of interest in land to a partnership
26
For the purposes of this Part of this Schedule, there is a transfer of
an interest in land to a partnership in any case where an interest in
land becomes partnership property.
Construction of references to transfer of interest in a partnership
5
27
For the purposes of this Part of this Schedule, there is a transfer of
an interest in a partnership where arrangements are entered into
under which—
(a)
a partner transfers the whole or part of his interest as
partner to another person (who may be an existing
10
partner), or
(b)
a person becomes a partner and an existing partner
reduces his interest in the partnership or ceases to be a
partner.
Construction of references to connected persons
15
28
Section 839 of the Taxes Act 1988 (connected persons) has effect for
the purposes of this Part of this Schedule.
Construction of references to arrangements
29
In this Part of this Schedule “arrangements” includes any scheme,
agreement or understanding, whether or not legally enforceable.”.
20
2
The following amendments are consequential on the amendment made by
paragraph 1—
(a)
in section 104(2) of the Finance Act 2003 (c. 14) (partnerships), for the
words following “Part 3” substitute “makes special provision for
certain transactions”;
25
(b)
in section 125(8) of that Act (continued application of stamp duty in
relation to certain partnership transactions) for “paragraph 13(2) and
(3)” substitute “paragraph 23”;
(c)
in paragraph 5 of Schedule 15 to that Act (partnerships: introduction
to Part 2 of Schedule), for the words following “Part 3 of this
30
Schedule” substitute “(transactions to which special provisions
apply)”.
3     (1)
The preceding provisions of this Schedule have effect in relation to
partnership transactions the effective date of which is after the day on which
this Act is passed.
35
      (2)
“Partnership transaction” means a transaction mentioned in paragraph 9(1)
of Schedule 15 to the Finance Act 2003 (c. 14) (as substituted by paragraph 1
of this Schedule).
      (3)
For the purpose of determining the effective date of a transaction mentioned
in paragraph 9(1)(b) of Schedule 15 to that Act, the transaction shall be taken
40
to be a land transaction.