LBTT7008 Partnership exemptions and reliefs

Exemptions and reliefs applicable to LBTT are applicable to Partnerships other than the exceptions below.

Where there is no chargeable consideration, the following are not exempt transactions:

• transactions involving the transfer of a chargeable interest to a partnership
• transactions involving the transfer of a chargeable interest from a partnership
• transfers of a partnership interest pursuant to arrangements that were in place at the time of a land transfer
• transfer of an interest in a property investment partnership treated as a land transaction

However, consideration should be given as to whether a transaction which is not exempt is notifiable.

For further guidance see:

Partnership notifications

LBTT(S)A 2013 schedule 17 paragraph 37

Group relief may be available for:

• a transfer to a partnership and
• a transfer of a partnership interest pursuant to arrangements that were in place at the time of the land transfer

where the relief conditions are met. Whether a partnership can claim group relief will depend on the nature of the partnership.

For Group relief to be applicable there must be:

• a group structure
• with bodies corporate
• who have issued share capital.

Scottish Partnerships and Scottish Limited Partnerships have a legal personality and can own shares in a subsidiary but they are not bodies corporate and therefore cannot claim group relief. Limited Liability Partnerships (wherever registered in the UK) are bodies corporate. 

This means a Scottish Partnership causes a break in the group structure.

English Partnerships and English Limited Partnerships have no legal personality. 

For the purposes of partnership transactions and group relief, relief is withdrawn:

• if a partner who was a partner at the effective date of the transaction which is exempt from charge ceases to be a member of the same group as the seller—

1. before the end of the period of 3 years beginning with the effective date of the transaction, or
2. in pursuance of, or in connection with, arrangements made before the end of that period.

and

• at the time the relevant partner ceases to be a member of the same group as the seller, a chargeable interest is held by or on behalf of the members of the partnership and that chargeable interest—

1. was acquired by or on behalf of the partnership under the relevant transaction, or
2. is derived from a chargeable interest so acquired,

and has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed.

When calculating the amount of tax chargeable where relief is partially withdrawn, an appropriate proportion has regard to the subject-matter of the transaction and what is held at the relevant time by or on behalf of the partnership and to the proportion in which the relevant partner is entitled at the relevant time to share in the income profits of the partnership.

References in the group relief schedule to the buyer is taken to be the relevant partner.

When calculating the SLP in relation to a transaction involving the transfer of an interest to a partnership, and a company would have been a corresponding partner (at step 2) of a relevant owner (at step 1) if they were an individual and the connected company and the relevant owner are members of the same group, the sum of lower proportions can be used for the connected company as if they were a corresponding partner at step 2 of the SLP calculation.

The group relief provisions apply but with the following modifications.

Group relief is not available to claim if the transaction is affected in pursuance of, or in connection with, arrangements under which the seller and the buyer cease to be members of the same group by reason of the buyer ceasing to be a 75% subsidiary of the seller or a third company.

Group relief is withdrawn, wholly or partially, where:

• a partner who was, at the effective date of the transaction which is exempt from charge, a partner and a member of the same group as the transferor, ceases to be a member of the same group as the seller—

1. before the end of the period of 3 years beginning with the effective date of the transaction, or
   1. in pursuance of, or in connection with, arrangements made before the end of that period.

and

• at the time the relevant partner ceases to be a member of the same group as the seller, a chargeable interest is held by or on behalf of the members of the partnership and that chargeable interest—

1. was acquired by or on behalf of the partnership under the relevant transaction, or
   1. is derived from a chargeable interest so acquired,

and has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed.

When calculating the amount of tax chargeable where relief is partially withdrawn, an appropriate proportion has regard to the subject-matter of the transaction and what is held at the relevant time by or on behalf of the partnership and to the proportion in which the relevant partner is entitled at the relevant time to share in the income profits of the partnership.

References in the group relief schedule to the buyer is taken to be the relevant partner.

On withdrawal of the relief the amount of tax chargeable is calculated on:

• the market value of the subject-matter of the relevant transaction; or
• if the acquisition was the grant of a lease, the rent

For partial withdrawal this would be an appropriate proportion which is:

• the market value of the subject-matter of the relevant transaction, and
• what is held at the relevant time by or on behalf of the partnership in the proportion to which the relevant partner is entitled at the relevant time to share in the income profits of the partnership

The rules for withdrawal and partial withdrawal of group relief apply in the same way to the partner and the transferor who was a member of the same group at the time of the transaction. 

For further guidance see:

Limited Liability Partnership Act 2000

LBTT(S)A 2013 schedule 17 paragraphs 38-39

LBTT3025 - Group relief | Revenue Scotland

Where there is:

• a transfer of a partnership interest pursuant to arrangements that were in place at the time of the land transfer or
• a transfer of an interest in a property investment partnership treated as a land transaction

charities relief can apply where the relief conditions are met with the following modifications.

A transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 17 or 32 of schedule 17 is exempt from charge if the transferee is a charity and the following conditions are met.

The relief conditions are:

• that every chargeable interest held as partnership property immediately after the transfer must be held for qualifying charitable purposes
• that the transaction has not been entered into for the purpose of avoiding LBTT (whether by the transferee or any other person).

Both of the qualifying conditions must be met for charities relief to be claimed.

A chargeable interest is held for qualifying charitable purposes if it is held for use in the furtherance of the charitable purposes of the transferee or of another charity, or as an investment from which the profits are applied to the charitable purposes of the partners.

Relief under this schedule is withdrawn, or partially withdrawn, if:

• a disqualifying event occurs before the end of the period of 3 years beginning with the effective date of the transaction, which was exempt from charge or in pursuance of, or in connection with, arrangements made before the end of that period, and
• at the time of the disqualifying event the partnership property includes a chargeable interest that was held as partnership property immediately after the relevant transaction, or that is derived from an interest held as partnership property at that time.

If relief is withdrawn, LBTT will then become payable on the proportion of the market value that would have been chargeable at the time that charities relief was claimed.

A “disqualifying event” means—

• the transferee ceasing to be established for charitable purposes only, or
• any chargeable interest held as partnership property immediately after the relevant transaction, or any interest or right derived from it, being used or held otherwise than for qualifying charitable purposes.

Relief is restricted to cases where all of the chargeable interests held by the partnership immediately after the transfer are held for charitable purposes. Therefore, partial relief is not available where a partnership holds some properties for charitable purposes and some not.

An “ appropriate proportion ” means an appropriate proportion having regard to—

• the chargeable interests held as partnership property immediately after the relevant transaction and the chargeable interests held as partnership property at the time of the disqualifying event, and
• the extent to which any chargeable interest held as partnership property at that time becomes used or held for purposes other than qualifying charitable purposes.

There is a transfer of an interest in a partnership for the purposes of charities where a person acquires a partnership share or a person's partnership share increases (to that partner and from the other partners).

Any reference to partnership property is to 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.

For further guidance see:

LBTT(S)A 2013 schedule 17 paragraph 40

LBTT3035 - Charities relief | Revenue Scotland

A, B and C are each 33.33% partners in a property investment partnership.

D (a body or trust established for charitable purposes only) wishes to become a partner.

D can claim LBTT charities relief against any liability to LBTT if all the land held by the partnership following D’s admission is held for qualifying purposes.
 
For further guidance see:

LBTT3035 Charities relief

LBTT(S)A 2013 schedule 17 paragraph 40

Where there is:

• a transfer of a partnership interest pursuant to arrangements that were in place at the time of the land transfer or
• a transfer of an interest in a property investment partnership treated as a land transaction

the transaction will be notifiable only if the consideration for the transaction exceeds the nil rate tax band. 

Where there is no chargeable consideration by virtue of the sum of lower proportions, Section 30 is not met and no return is required. If you are in doubt, please contact Revenue Scotland.
 
The consideration for a transaction exceeds the nil rate band if either of the following conditions are met:

• the chargeable consideration; or
• where the transaction is one of a number of linked transactions, the total chargeable consideration for all the linked transactions,

exceeds the nil rate band applicable to the transaction.