Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
574

(b)
that chargeable consideration shall be taken to be equal to
the chargeable proportion of the market value of the
interest transferred.
      (6)
The chargeable proportion is the total of the other partners’
partnership shares immediately after the transfer.
5
Transfer of partnership interest: consideration given and interest in land held
12    (1)
A transfer of an interest in a partnership is a chargeable
transaction if—
(a)
consideration is given for the transfer, and
(b)
the relevant partnership property includes an interest in
10
land.

The purchaser under the transaction is the person who acquires an
increased partnership share or, as the case may be, becomes a
partner in consequence of the transfer.
      (2)
Consideration is regarded as given for the transfer—
15
(a)
in a case within paragraph 27(a), if consideration in money
or money’s worth is given by or on behalf of the person
acquiring the interest;
(b)
in a case within paragraph 27(b), if there is a withdrawal of
money or money’s worth from the partnership by the
20
person reducing his interest or ceasing to be a partner.
      (3)
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—
(a)
any interest that was transferred to the partnership in
25
connection with the transfer;
(b)
a lease to which paragraph 13 (exclusion of market rent
leases) applies.
      (4)
The chargeable consideration for the transaction shall be taken to
be equal to a proportion of the market value of the relevant
30
partnership property.
      (5)
That proportion is—
(a)
if the person acquiring the interest in the partnership was
not a partner before the transfer, his partnership share
immediately after the transfer;
35
(b)
if he was a partner before the transfer, the difference
between his partnership share before and after the transfer.
Exclusion of market rent leases
13    (1)
A lease held as partnership property immediately after a transfer
of an interest in the partnership is not relevant partnership
40
property for the purposes of paragraph 12(3) if the following three
conditions are met.
      (2)
The first condition is that—
(a)
no consideration other than rent has been given in respect
of the grant of the lease, and
45

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
575

(b)
no arrangements are in place at the time of the transfer for
any consideration other than rent to be given in respect of
the grant of the lease.
      (3)
The second condition is that the rent payable under the lease as
granted was a market rent at the time of the grant.
5
      (4)
The third condition is that—
(a)
the lease provides for the rent payable under it to be
reviewed;
(b)
the first review date is not more than 5 years after the date
on which the term of the lease begins;
10
(c)
if there is more than one review date under the lease, the
interval between any two of them is not more than 5 years;
(d)
the rent payable under the lease as a result of a review is
required to be the market rent at the review date (or, if
higher, the rent payable under the lease immediately
15
before the review date).
      (5)
The market rent of a lease at any time is the rent which the lease
might reasonably be expected to fetch at that time in the open
market.
      (6)
A review date is a date from which the rent determined as a result
20
of a rent review is payable.
Partnership interests: application of provisions about exchanges etc.
14    (1)
Where paragraph 5 of Schedule 4 (exchanges) applies to the
acquisition of an interest in a partnership in consideration of
entering into a land transaction with an existing partner, the
25
interest in the partnership shall be treated as a major interest in
land for the purposes of that paragraph if the relevant partnership
property includes a major interest in land.
      (2)
In sub-paragraph (1) “relevant partnership property” has the
meaning given by paragraph 12(3).
30
      (3)
The provisions of paragraph 6 of Schedule 4 (partition etc:
disregard of existing interest) do not apply where this paragraph
applies.
Transfer of partnership interest pursuant to earlier arrangements
15    (1)
This paragraph applies where—
35
(a)
there is a transfer of an interest in land to a partnership
(“the land transfer”);
(b)
the land transfer falls within paragraph (a), (b) or (c) of
paragraph 10(1);
(c)
there is subsequently a transfer of an interest in the
40
partnership (“the partnership transfer”);
(d)
the partnership transfer is made—
(i)
if the land transfer falls within paragraph 10(1)(a)
or (b), by the person who makes the land transfer;
(ii)
if the land transfer falls within paragraph 10(1)(c),
45
by the partner concerned;

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
576

(e)
the partnership transfer is made pursuant to arrangements
that were in place at the time of the land transfer;
(f)
the partnership transfer is not (apart from this paragraph)
a chargeable transaction.
      (2)
The partnership transfer is a chargeable transaction.
5
      (3)
The partners shall be taken to be the purchasers under the
transaction.
      (4)
The chargeable consideration for the transaction shall be taken to
be equal to a proportion of the market value, as at the date of the
transaction, of the interest transferred by the land transfer.
10
      (5)
That proportion is—
(a)
if the person making the partnership transfer is not a
partner immediately after the transfer, his partnership
share immediately before the transfer;
(b)
if he is a partner immediately after the transfer, the
15
difference between his partnership share before and after
the transfer.
      (6)
The partnership transfer and the land transfer shall be taken to be
linked transactions.
      (7)
Paragraphs 6 to 8 (responsibility of partners) have effect in relation
20
to the partnership transfer, but the responsible partners are—
(a)
those who were partners immediately before the transfer
and who remain partners after the transfer, and
(b)
any person becoming a partner as a result of, or in
connection with, the transfer.
25
Transfer of interest in land from a partnership: general
16    (1)
This paragraph applies where an interest in land is transferred—
(a)
from a partnership to a person who is or has been one of
the partners, or
(b)
from a partnership to a person connected with a person
30
who is or has been one of the partners.
      (2)
There is a transfer of an interest in land from a partnership in any
case where—
(a)
an interest in land that was partnership property ceases to
be partnership property, or
35
(b)
an interest in land is granted or created out of partnership
property and the interest is not partnership property.
      (3)
The chargeable consideration for the transaction shall be taken to
be equal to the chargeable proportion of the market value of the
interest transferred.
40

Paragraph 18 provides for determining the chargeable proportion.
      (4)
Paragraph 17 applies (instead of sub-paragraph (3)) if the whole or
part of the chargeable consideration for the transaction is rent.
      (5)
For the purposes of this paragraph property that was partnership
property before the partnership was dissolved or otherwise
45
ceased to exist shall be treated as remaining partnership property
until it is distributed.

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
577

Transfer of interest in land from a partnership: chargeable consideration including
rent
17    (1)
This paragraph applies in relation to a transaction to which
paragraph 16 applies where the whole or part of the chargeable
consideration for the transaction is rent.
5
      (2)
Schedule 5 provides for the calculation of the tax chargeable in
respect of the transaction, subject to the following provisions of
this paragraph.
      (3)
Paragraph 2 of Schedule 5 (calculation of tax chargeable in respect
of rent) has effect as if—
10
(a)
for “the net present value of the rent payable over the term
of the lease” there were substituted “the chargeable
proportion of the net present value of the rent payable over
the term of the lease”, and
(b)
for “the net present values of the rent payable over the
15
terms of all the leases” there were substituted “the
chargeable proportions of the net present values of the rent
payable over the terms of all the leases”.
      (4)
If there is chargeable consideration other than rent, that
chargeable consideration shall be taken to be equal to the
20
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
25
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.
30
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
35
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—
40
(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.
45

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
578

      (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—
5
(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
10
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.
15

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
20
the partners.

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
25
the date on which he became a partner.

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;
30
(b)
if the relevant partner became a partner after that date, is
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—
35
(a)
occur in the period starting on the day after the relevant
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.
40

An increase counts for the purpose of paragraph (b) only if—
(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
45
duty under the enactments relating to stamp duty;

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
579

(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
5
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
10
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.
15
      (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
20
of this paragraph.
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.
25
      (2)
But this Part of this Schedule has effect subject to any other
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),
30
or
(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),
35

the acquisition of an interest in a partnership is not a chargeable
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
40
paragraph 12 or 15 (transfer of partnership interest) is not a
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—
45

Finance Bill
Schedule 39 — Stamp duty land tax: application to certain partnership transactions
580

(a)
the relevant consideration for the purposes of section 55
(amount of tax chargeable: general) is such that the rate of
tax chargeable under that section is 1% or higher;
(b)
the relevant rental value for the purposes of Schedule 5
(amount of tax chargeable: rent) is such that the rate of tax
5
chargeable under that Schedule is 1% or higher.
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
10
the application of the enactments relating to stamp duty in relation
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
15
including any property that is the subject-matter of a transaction
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.
20
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
25
(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
30
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.
35
      (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
40
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—
45