Commentary on Sections

Part 8 – Interpretation and Final Provisions

Schedule 7– Partnerships

Part 4 - Transactions involving transfers to a partnership

285.Part 4 provides that the transfer of an interest in land to a partnership by a partner, a person who becomes a partner in return for the interest (a “prospective partner”), or someone connected to either such person, is a chargeable transaction. The chargeable consideration for such a transfer is determined as being a proportion of the market value of the interest transferred. That proportion is a function of the ownership share in the transferred interest in land held by the transferee(s), and the partnership share(s) of the partner(s) or prospective partner(s) immediately after the transfer. In brief, this takes account of the extent to which a person is transferring the interest to themselves in this scenario. The formula used to calculate the chargeable consideration is set out in paragraphs 13 and 14.

286.Part 4 also contains anti-avoidance provisions to prevent a person purporting to transfer property into a partnership in a way which enjoys a tax discount under this Part, in circumstances where the person subsequently exits the partnership, or otherwise reduces their partnership interest or extracts capital from the partnership.