Stamp Duty when transferring the ‘whole business’ of a Partnership into a Limited Company

Stamp Duty Land Tax “SDLT” is not payable when a family-owned business partnership transfers its ‘whole business’ to a company at the point of incorporation, nor is a return needed. This also applies to non-family partnerships where the partners retain joint control of their new company. The legislation is FA2003/sch15 as amended by FA2004/Sch41

In Scotland, the applicable legislation is Land and Buildings Transaction Tax (Scotland) Act 2013 Schedule 17.

The Partnership Act 1890 Act describes a partnership as ….

‘the relation which subsists between persons carrying on a business in common with a view of profit.”

Please see  https://www.legislation.gov.uk/ukpga/Vict/53-54/39/section/1

Further tests as to whether you are running a Partnership are:-

1. Is there a business? A Partnership cannot exist based purely on Joint Ownership. A business must also exist.
2. Do the owners of the business share income, expenses, profits, losses and risks?
3. Are the co-owners ‘co-adventurers in business’?

According to case law, the factors that point to the activities involved being broadly what you would expect in a business are:

• Is there a “serious undertaking earnestly pursued” or a “serious occupation”
• Is there an occupation or function actively pursued with reasonable or recognisable continuity?
• Is there a certain amount of substance in terms of turnover?
• Are the activities conducted in a regular manner and on sound and recognised business principles?
• Are they of a kind which, subject to differences of detail, are commonly made by those who seek to profit by them

Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers)