partnership dissolution stamp duty

[travis]

Two unrelated business partners jointly owning a number of mortgaged residential rental properties, wish to dissolve the partnership. There is no cash consideration as each will become outright owner of half of the properties comprising the original portfolio. What are the stamp duty considerations? - IR are saying it's payable but I have some doubts. CGT seems to be negated by the ESCD26 dispensation as there are no sale proceeds and the transfer takes place at balance sheet, rather than market value. Need help fast - mail atd@clara.co.uk if preferred. Many thanks.

[johnfkavanagh]

Dear Travis

Under the Stamp Duty Land Tax rules, duty is payable on the basis of the market values of the properties being exchanged. Where joint interests are being exchanged or partitioned, that part of the value which relates to the interest in the property which is already owned by the transferee is not charged to SDLT.

If, as I suspect, the letting business is being funded partly by debt which is to be rescheduled after the exchanges, you need to be aware of the rules on assumptions of liabilities which also amount to chargeable consideration for SDLT purposes.

John Kavanagh
UK Tax Consulting Limited
www.uktaxconsulting.co.uk
mail@uktaxconsulting.com

[travis]

Thanks for that John. It all seems so hard to belive (ie. unfair) that such a transfer should attract tax. Neither of us will be worth any more as a result of the change. What if one of us had died, giving rise to the need for a change?

The other aspect of this is whether the properties are linked, as in a 'liked transaction'. The majority fall below the threshold (and we only want the 'other' 50% of the value). If this is a linked transaction, then someone purchasing two properties for 50K each at auction could find themselves with tax to pay too!???