A partner joins a partnership on 1 April. The partnership’s chargeable interests (it is not a property investment partnership) consist of office premises that were acquired by the partnership on 1 June the previous year for £1 million. After joining the partnership, the new partner has a quarter share in the partnership which, after the new partner has joined, consists of four partners each with a quarter share in the partnership. No LBTT is charged on this transaction because there is no land transaction and it is not a property investment partnership.
On 1 July, the new partner buys out the partnership shares of two of the other three partners, and so has increased the new partner’s share in the partnership by 200% to 75%. No LBTT is charged on this transaction because it is not a property investment partnership.
The new partner has overstretched themselves by buying out the two partners, and on 6 December of that year six new partners join the partnership on the basis that both the new and then existing partners are each to have equal shares of 1/8 of the partnership. No LBTT is charged on this transaction because it is not a property investment partnership.
On 1 February the following year, the partner decides to leave the partnership to start a new business, and the partners agree that the exiting partner can take ownership of the office premises acquired on 1 June the previous year. At the time of the land transfer from the partnership to the exiting partner, the partnership share attributable to that partner is 12.5%, and so the LBTT that the exiting partner will pay will be determined by the following formula:
MV x (100 – 12.5)%, so the exiting partner’s LBTT payment is discounted to reflect their share in the partnership just prior to the effective date of the land transfer of the office premises to the exiting partner.
Interaction with deemed market value
Where the buyer in a land transaction is a company and the seller is connected to the buyer, the chargeable consideration for the transaction is taken to be not less than the market value (see LBTT2007). However, in partnership transactions, the consideration as determined by the application of LBTT(S)A 2013 schedule 17 part 5 takes precedence over the deemed market value rule.