SDLTM34430 - Application of exemptions and reliefs: Group Relief

There is a transfer of a chargeable interest from B Ltd to SP/Sc LP. For structure details see SDLTM34410.

We are looking at a transfer to a partnership so the provisions of para 2 will apply so we need to establish any SDLT liability using para10, 12 and 27A - see SDLTM33550.

Step One

Identify the relevant owner or owners.

B Ltd is a relevant owner because, immediately before the transaction, it is entitled to a proportion of the chargeable interest and immediately after the transaction it was a partner.

Step Two

For each relevant owner, identify the corresponding partner or partners.

B Ltd is its own corresponding partner because, immediately after the transaction it was a partner and it was the relevant owner.

As C Ltd is connected to B Ltd, the relevant owner, and they are part of the same group, para 27A applies.

Therefore, C Ltd is also a corresponding partner as immediately after the transaction it was a partner and it is connected to the relevant owner (para27A).

Step Three

B Ltd is entitled to 100% of the chargeable interest immediately before the transaction.

There are two corresponding partners so this proportion can be apportioned between B Ltd and C Ltd, this can be carried out to give the most beneficial result.

For this example we will apportion 50:50 as this will give the most benefit.

Step Four

The lower proportion for each person who is a corresponding partner is the proportion of the chargeable interest attributable to the partner, or if lower, the partnership share attributable to the partner.

As the proportion of the chargeable interest attributed to each partner at Step Three was 50 and the partnership share attributable to each partner is also 50 the lower proportion has to be 50 each

Step Five

We add the lower proportions together, 50 + 50.

As a result, the sum of the lower proportions in this instance is 100.

As the SLP is 100, there is no chargeable consideration for the transaction.

Application of Paragraph 27A and Group Relief

Had para 27A not applied, then C Ltd would not have been treated as a corresponding partner and the SLP would have been 50 and the chargeable consideration for the transaction would have been on 50% of the market value of the chargeable interest.

However, as a result of para 27A, the charge in respect of the transfer to the ELP is reduced to the amount that would have been payable had the connected company, which is C Ltd, been a corresponding partner of B Ltd (as calculated above).

By using the provisions of para 27A, the SLP in this instance is 100. The charge has been reduced as had C Ltd not been regarded as a corresponding partner, the SLP would have been 50. So, there has been a 50% reduction (50% reduced to 0% of the market value of the chargeable interest).

Para 27A is a form of group relief and so the partnership will need to make a claim for group relief in a land transaction return in respect of the reduction in charge (i.e. 50% in the above example). Furthermore, the claim will be subject to the usual group relief conditions (Sch7/para2), subject to some modifications (para27A(3)).