The following set of rules about withdrawal of money is an anti-avoidance provision charging on the withdrawal of money which is linked to a previous land transaction.
Where certain ‘qualifying events’ occur within three years of a land transfer, they are treated as a land transaction and as a chargeable transaction for the purposes of LBTT.
The following are qualifying events:
- withdrawal from the partnership of money or money’s worth (that is not income profit) by the relevant person of capital from the partner’s capital account, in such a case the chargeable consideration shall be taken to be the value of the money or money’s worth withdrawn from the partnership;
- a withdrawal that reduces a person’s interest;
- a withdrawal that comes about as the result of a person ceasing to be a partner;
- where a relevant person has made a loan to a partnership, the repayment of any part of that loan. The chargeable consideration will be taken to be equal to the amount repaid by the partnership; and
- where a relevant person has made a loan to the partnership, a withdrawal from the partnership of money or money’s worth that does not represent income profit. The chargeable consideration in this case will be the value of the money or money’s worth so far as it does not exceed the amount of the loan made.
The relevant person is an existing partner who transfers a chargeable interest to a partnership, or a person who transfers a chargeable interest to a partnership in exchange for a share in the partnership, or a person who is connected to the existing partner or incoming partner.
Any chargeable consideration should not exceed the market value (see LBTT2016) of the chargeable interest at the effective date of the land transfer and should be reduced by any amount that was previously chargeable to tax.
The amount of tax payable (if any) in respect of the qualifying event is to be reduced (but not below nil), where applicable, by the amount of tax payable resulting from the transfer of an interest in a property investment partnership (see LBTT7011).