bulletin
LLPs and SDLT group relief – HMRC change of interpretation
30 November 2010
What’s changed?
HM Revenue and Customs (HMRC) have recently announced a change
in how they treat limited liability partnerships (LLPs) in the
context of claiming relief from stamp duty land tax (SDLT) on
property transfers or lease grants between members of the same
corporate group. After taking legal advice, HMRC now treat LLPs as
a 'body corporate' for this relief. Previously they had taken the
view that LLPs weren’t a 'body corporate' and that you simply
looked through an LLP, when deciding if you had a group that
qualified for this SDLT relief.
The announcement also impacts on group relief for stamp duty
purposes, which broadly relates to transfers of shares or certain
other securities within a group.
Is this relevant to me?
- If you have an existing group structure holding property, with
a mixture of companies and an LLP; or
- are looking to set up or reorganise such a group which holds
property in it; and
- are about to, or may in the future, move property around the
group;
this change could be relevant to you.
What hasn’t changed?
For a group to qualify for SDLT group relief, among other things
you need one 'body corporate' to be at least a 75% subsidiary of
another, or two 'bodies corporate' to be at least a 75% subsidiary
of a mutual parent. The recent change in HMRC’s views on LLPs
doesn’t alter this basic condition of the relief. A key difference
between LLPs and companies is of course that an LLP doesn’t issue
share capital to its members. So following this change, company
members of an LLP still cannot form an SDLT group with an LLP (if
they’re not otherwise grouped).
Can you give me some examples?
Take a situation where A Limited and B Limited are the two
members of an LLP, A Limited having an 80% share and B Limited a
20% share. The LLP in turn owns 100% of C Limited and D Limited
(and assume all other group relief conditions are met).
Example a - transfer of property from A Limited to C
Limited: before this change, this could have qualified for
SDLT group relief, as you would have looked through the LLP; but
following the change, SDLT group relief would not be available, as
the group is effectively blocked going down by the LLP (as it does
not have any issued share capital).
Example b - transfer of property from C Limited to D
Limited: before the change, SDLT group relief could have
been available (looking through the LLP to form a group with A
Limited, C Limited and D Limited). Following the change SDLT group
relief could still be available, as C Limited and D Limited can
form a group with the LLP (but no longer with A Ltd).
Transfers in or out of an LLP to/from companies would interact
with other SDLT rules, which are beyond the scope of this note. But
this change in HMRC’s interpretation on the group relief rules
should still be taken into account.
If you have an existing group structure with an LLP within it,
you should check the impact of this change in interpretation before
transferring any property within the group, to see if SDLT group
relief would still be available. Similarly, if you are looking to
set up a new group structure which would hold property, you should
consider the impact of these new rules. You may also wish to
consider if an 'ordinary' partnership, a Limited Partnership, or
just companies, would achieve better results from an SDLT
perspective than using an LLP. Of course, the impact of any other
taxes should be borne in mind, as well as possible SDLT
implications.
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