partnerships – connected persons

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    ‘ve been looking at the building works exemption at FA 2003 Sch 4 para 10 and I’ve got a question on how the connected persons rules apply.

    The context is as follows:

    Landlord is carrying out works to a building. Total cost of the building works around ?1m. The building will be occupied by two different LLP tenants, LLP A and LLP B. Current proposal (in relation to LLP A) is that LLP A will pay a premium of around ?750k (plus VAT) and a certain periodical rent.

    I’m looking at whether LLP A could engage construction company in respect of ?750k of building works which falls within para 10, instead of paying premium, to mitigate SDLT charge. Value of works in relation to LLP A demise is probably only about ?100k. Value of works in relation to LLP B demise about ?900k.

    Requirements look capable of being satisfied providing the two tenants are connected person under section 839.

    Members of LLP A comprise V, W, X, Y and Z. Members of LLP B comprise Y and Z.

    If LLP treated as relevant entity then there appears to be no way to connect two separate LLPs. If treat LLPs as transparent and look through to partners (which seems to be proper analysis) V, W, X, Y and Z all appear to be connected with each other (subject to the bona fide commercial arrangements for acquistions and disposals). Is this correct? Could this be a strategy to mitigate SDLT.

    Any views welcome.

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