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lLPs and SDLT group relief - HMRC change of interpretation

29 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 werent 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 HMRCs views on LLPs doesnt alter this basic condition of the relief. A key difference between LLPs and companies is of course that an LLP doesnt 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 theyre 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).

LLP Diagram

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 HMRCs 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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