Home › Forums › Patrick Cannon › Is SDLT payable on the transfer of capital interest in a partnership?
- This topic has 4 replies, 1 voice, and was last updated 15th April 2018 at 8:26 am by Jupiter Button.
This is probably a point which may need to be discussed in conference but I thought I would put it here for an initial steer.
An LLP holds about ?1m worth of properties. The partners of the LLP are a company and husband and wife. H and W are also the shareholders in the company. 94% of the capital and profit share are held by the company. The rest is split equally between H and W.
The properties were acquired by the LLP about 6 months ago. The purchase was made using a sub-sale planning arrangement where the company was an intermediary. No duty was payable as a result of the planning.
H and W would now like to have greater capital share in LLP.
A gift by the company of some of its capital share to H and W seems like a way to avoid duty if only para 14 of Schedule 15 could be side-stepped.
Gift would be a type B transfer, so is there a route here to make an election under para 12A to disapply para 10 from applying on the original purchase of the ?1m of properties? Would this take all the partnership property out of the definition of ‘relevant partnership property’ and therefore mean that there would be no chargeable consideration under para 14(6)?
Section 75A shouldn’t apply to this transaction because it would be a gift. I am assuming that the above proposal is not in connection with the earlier planning and so there wouldn’t be an application of section 75A on the combined arrangements.
The disapplication of para 10 on the original purchase shouldn’t cause any problems because the transfer from the company (as intermediary) to the LLP only involved a small transfer of the equitable interest in the properties and was under the threshold both under schedule 15 and section 75A.
This is one of those ideas which came to me in a couple of minutes, so there could be some obvious drawback..but any thoughts would be welcome.PatrickGuest
You’re correct in thinking that a retrospective election under para 12A would withdraw the benefit of para 10 on the original transfer to the LLP and avoid the para 14 issue on the transfers of the company’s interest in the LLP. However I don’t quite follow the reasoning in your second last para about the original interest transferred to the LLP being small. If the company sub-sold ?1m worth of property to the LLP then was not the interest transferred worth ?1m on which SDLT would be due in the absence of para 10?Jupiter ButtonGuest
In the absence of para 10, the normal partnership rules would apply, and the transfer by the company to the partners of the LLP only involves 6% of the chargeable interest being transferred to persons other than the company.PatrickGuest
But wouldn’t para12A(2)(b) create a mv charge?Jupiter ButtonGuest
Is it possible to argue that the chargeable interest transferred is just 6% of the entire interest (on the basis that under the look through treatment, as per Part 2, 94% of the interest is retained by the company)?
Is this where my idea starts breaking down?