Transferring land from your partnership to individual partners might seem like a simple structural change with no real impact on the ownership of the land in question.

It might also seem fair that this sort of transaction should not attract stamp duty land tax, particularly where the value of the land being shared out to partners is equivalent to the value of their capital account, for example on retirement of a partner or dissolution  of a partnership.

HMRC, unsurprisingly, takes a different view when stamp duty land tax is payable on partnership transactions.  The starting point is that the partner taking ownership of a partnership asset must pay stamp duty land tax on the market value of the land equivalent, less the percentage of their partnership interest.

For example, where two unconnected partners both have 50% shares in the partnership and land with a market value of £500,000 is transferred to one partner, that partner would be liable to pay stamp duty land tax on 50% of the market value, i.e. £250,000.  Even where both partners were taking equivalent valued properties out of the partnership, such as on dissolution, both would be required to pay stamp duty land tax on 50% of the value of the land transferred.

However, there are exemptions and allowances built into the Finance Act 2003 which can be applied, particularly in family farming partnerships, to avoid having to pay stamp duty land tax.  Expert legal advice on any transaction will help you avoid unnecessary tax liabilities.

If you are considering a partnership restructure or a transfer of partnership assets and would like to discuss how these rules might apply to your farm, please contact our rural business team.

David Wybar
01206 217812
david.wybar@birkettlong.co.uk