Partnerships & SDLT

Overview of Partnership SDLT Rules

SDLT treats partnerships as transparent — meaning that the partnership itself is not treated as a separate person for SDLT purposes. Instead, each partner is treated as owning a proportionate share of the partnership property.^[1]

This transparency principle gives rise to complex rules when property moves in and out of partnerships, or when partnership interests change hands. These rules are contained in Schedule 15 of the Finance Act 2003 and apply to all types of partnership.^[3]

Ordinary Partnership Purchases

When a partnership buys property from an unconnected third party, SDLT applies in the normal way:

• SDLT is calculated on the full purchase price
• The responsible partners (usually all partners at the time of the transaction) are jointly and severally liable
• Normal rates, reliefs, and thresholds apply

The special partnership provisions do not apply to ordinary third-party purchases — only to transfers involving the partners themselves.

Transfers of Property into a Partnership

When a partner (or connected person) transfers property into a partnership, the SDLT charge is calculated using the sum of lower proportions (SLP) test:^[2]

1. Determine the market value of the property being transferred
2. For each relevant person, compare their partnership share before and after the transaction
3. Take the lower proportion for each person
4. Sum the lower proportions — this is the SLP
5. SDLT is charged on: market value × (100% − SLP)

Connected Persons

The SLP calculation is modified where connected persons are involved. If the transferor is connected to any of the partners, their partnership share is treated as including the shares of all connected partners for the SLP calculation.^[2]

This anti-avoidance measure prevents property owners from reducing SDLT by bringing connected persons into a partnership to inflate the SLP. Connected persons include:

• Relatives (spouse, civil partner, siblings, parents, children, and their spouses)
• Companies controlled by the partner or their relatives
• Trustees of settlements where the partner is a settlor or beneficiary

Transfers of Property out of a Partnership

When property is transferred from a partnership to a partner (or connected person), a similar but separate SLP calculation applies. The charge is based on:^[2]

• The market value of the property at the time of transfer
• The proportion of ownership that is shifting (i.e. the part not already effectively owned by the recipient through their partnership share)

Limited Liability Partnerships (LLPs)

Despite being incorporated as separate legal entities, LLPs are treated as partnerships for SDLT purposes. This means:^[1]

• The LLP is transparent — members are treated as partners
• Schedule 15 applies to property transfers in and out
• The SLP test and connected-persons rules apply

However, there is one important exception: if an LLP is wound up and its property is distributed to members, the transfer is generally not subject to SDLT (provided the LLP was a genuine partnership throughout).

Scottish Limited Partnerships (SLPs)

Scottish limited partnerships have separate legal personality under Scots law. For SDLT purposes, they are treated the same as other partnerships — the transparency principle and Schedule 15 rules apply.^[3]

Transfer of Partnership Interests

A transfer of a partnership interest (e.g. one partner selling their share to another) can trigger SDLT where the partnership property includes land. The charge is based on the market value of the land attributable to the partnership interest being transferred, subject to certain exclusions.^[2]

Further Reading

• Trusts and SDLT — another entity type with special SDLT provisions
• Group Relief & Corporate Transfers — relief for company group transactions
• Commercial SDLT Rates — rates for non-residential partnership property
• SDLT Glossary — definitions of key SDLT terms