A partnership property is an interest or right held by or on behalf of a partnership, or the members of a partnership, for the purposes of the partnership business. Amongst other things this reflects the practice in Scotland that title to partnership property is not held in the name of the firm itself. Section 70 of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 allows Scottish firms to hold title in their own name but the practice of title being otherwise held remains more common e.g. title held in the name of a trust for the firm, or in the name of one of the partners.
Any reference to a person’s partnership share at any time is to the proportion in which the person is entitled at that time to share in the income profits of the partnership.
Transfer of chargeable interest
A transfer of a chargeable interest includes:
- the creation of a chargeable interest;
- the renunciation or release of a chargeable interest; and
- the variation of a chargeable interest.
Transfer of chargeable interest to and from a partnership
Paragraphs 46 and 47 of schedule 17 to the LBTT(S)A 2013 provide that, in certain circumstances, acquisitions and disposals of chargeable interest can be constituted by how assets are deployed in respect of partnership business. If the assets are deployed for the first time in a partnership business then there is an acquisition by the partnership.
The provisions underline the risks of not using assets held by a partnership for the purpose of partnership business. Because the purpose of the Sum of Lower Proportions (SLP) discount is to aid working partnership, the discount may be rejected if assets entering a partnership are clearly not for the purpose of the partnership business, such as an accountancy partnership acquiring riding stables.
Transfer of interest in a partnership
Where a person acquires a partnership share or a person’s partnership share increases there is a transfer of an interest in the partnership (to that partner and from the other partners).
Connected persons has the same meaning as it has for section 1122 of the Corporation Tax Act 2010, but subsection 7 (partners connected with each other) is omitted.
For the purposes of:
- transfers of chargeable interests into a partnership by a partner, someone becoming a partner or someone connected with a partner or someone becoming a partner; or
- the sum of the lower proportions calculation (see LBTT7005) for transactions involving transfers of a chargeable interest from a partnership,
section 1122 of the Corporation Tax Act 2010 applies with the omission of subsection (6)(c) to (e).
‘Arrangements’ include any scheme, agreement or understanding, whether or not legally enforceable.
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.