LBTT7006 Property investment partnerships (PIP)

Property investment partnerships (PIPs) are partnerships whose sole or main activity is investing or dealing in chargeable interests (including but is not restricted to carrying out construction operations on the land in question).

Chargeable interests include any interest which would be chargeable if it were in Scotland, but relates to land outwith Scotland. Partnerships holding such interests can fall within the definition of property investment partnership.

For the definition of construction operations, please see Finance Act 2004 (legislation.gov.uk).

Transfer of interest in partnership treated as a land transaction

Where there is a transfer of an interest in a PIP and the relevant partnership property includes a chargeable interest, the transfer of the interest/shares is treated as the transfer of chargeable interests and is a chargeable land transaction. Scottish Ministers may make similar regulations in respect of residential property holding companies.

The buyer in the land transaction is either:

the person/partner who increases their partnership share as a result of the transfer

a person who joins the partnership.

The consideration is a proportion of the underlying chargeable assets (relevant partnership property). That proportion is:

for a person acquiring an interest in the partnership for the first time
- their share in the partnership immediately after the transfer
or
if the person acquiring an interest in the partnership is already a partner
- the difference between the partnership share before and after the transfer

There are two forms of transfer of an interest in a partnership - Type A and Type B transfers.

Type A transfers

A Type A transfer is a transfer that takes the form of arrangements entered into under which:

all or part of a partner’s interest is acquired by:
- another partner or another person
- and the partner or person gives money or money’s worth to the partner for acquiring the interest

a person becomes a partner and the interest of an existing partner reduces or an existing partner leaves the partnership and
the existing partner withdraws money or money’s worth from the partnership that was not available before the transfer.

Type B transfers

Type B transfers are any form of transfer that is not a Type A transfer.

Relevant partnership property

Type A transfers:

all chargeable interests held by the partnership immediately after the transfer

With the following exceptions:

chargeable interests transferred to the partnership as part of the transaction
market rent leases
any other chargeable interest not reasonably attributable to the interest in the partnership that is being transferred

Type B transfers:

all chargeable interests held by a partnership immediately after the transfer

With the following exceptions:

chargeable interests transferred to the partnership as part of the transaction
market rent leases
any other chargeable interest that is not reasonably attributable to the interest in the partnership that is being transferred
any transfer of a chargeable interest where the buyer has elected to disapply the partnership rules
any other chargeable interest whose transfer to the partnership was not made by a partner, someone becoming a partner, or a person connected with a partner.

For the transfer of an interest in a PIP, there are anti-avoidance measures are in place.

Group relief withdrawal

Where there is a transfer of an interest in a PIP and the relevant partnership property includes a chargeable interest, the transfer of the interest/shares is treated as the transfer of chargeable interests for group relief withdrawal purposes, to the extent that the relevant partnership property consists of a chargeable interest.

This is only in relation to withdrawal whereby at the time the buyer ceases to be a member of the same group as the seller, it or a relevant associated company holds a chargeable interest that was acquired by the buyer or that is derived from the transaction and has not subsequently been acquired at market value and group relief was available, but not claimed.

Market rent leases

A lease held as partnership property immediately after a transfer of an interest in the partnership are not relevant partnership property for Type A or Type B transfers if the following conditions are met:

The first condition:

the only chargeable consideration given for the grant of the lease is rent

and

no arrangements to give any chargeable consideration other than rent (i.e. a premium) for the grant of the lease are in place at the time of the transfer

The second condition:

at the time of granting the lease, the rent payable is a market rent

The third condition:

the term of the lease is five years or less

or
if the term of the lease is more than five years:
- the lease provides for the rent payable to be reviewed at least once in every five years of the term
  
  and
- as a result of the review the rent payable is required to be the market rent at the review date

The market rent of a lease is the rent which might be reasonably expected on the open market.

A review date is the date on which the rent payable is determined because of a rent review.

The fourth condition:

no changes during the lease term cause the rent payable to be less than a market rent

Exchanges of partnership interests

Where one or more land transactions are entered into by a person as buyer wholly or partly in consideration of one or more other land transactions being entered into by that person as seller, the exchange rules apply. If this applies to the acquisition of an interest in a partnership in consideration of entering into a land transaction with an existing partner, the interest in the partnership is to be treated as a major interest in land for the exchange rules, but only if the relevant partnership property includes a major interest in land.

The exemption for the share of the interest held by a buyer immediately before the division or partition of a chargeable interest not counting as chargeable consideration is not applicable if the exchange rules apply.

Election by a PIP to disapply part 4 rules

For a transfer to a PIP (where Part 4 would apply) the buyer can elect for the partnership rules not to apply. If an election is made:

Part 5 (transfer from a partnership) are also disapplied, if relevant
the chargeable consideration is taken to be the market value of the interest transferred and
the transaction is treated as an ordinary partnership transaction under Part 3 see (LBTT7007 Ordinary partnership transactions).

This type of election must be included in the original LBTT return or an amendment to that return. The election is permanent and no amendment can be made to withdraw from the election once made.

Elections made by an amendment to the original return (main transaction) take effect from the date the original return was made and you can amend any LBTT return for an affected transaction to take account of the election (within the normal amendment period only).

Affected transaction refers to:

any transfer of an interest in a PIP treated as a land transaction with an effective date on or after the effective date of the main transaction.

For further guidance see:

Last updated: 4 July 2025

Updated