SDLT: trees and PIPs
We are aware that FA 2003, Sch 15 para 14 now limits a charge to stamp duty land tax on transfers of partnership interests to ‘property investment partnerships’. Our query, however, concerns whether a particular partnership’s activity would cause it to fall within the definition of a ‘property investment partnership’.
Specifically, the partnership owns forestry and our understanding is that the activities undertaken do not go beyond typical ‘commercial management’, i.e. the felling and selling of timber, with the restocking of depleted areas as required. Such activities are not regarded as a ‘trade’, for income tax purposes (ITTOIA 2005, s 11), but does this then mean that the partnership is not ‘trading’ for stamp duty land tax purposes and so is a ‘property investment partnership’?
Taxation readers’ thoughts would be appreciated.
Query 17,823 – Woody.
From July 2006 the SDLT charge on transfers of interests in land-owning partnerships was restricted to transfers of interests in property investment partnerships (‘PIPs’). Further changes made by FA 2007 to the SDLT legislation with effect from 19th July 2007 mean that most transfers of interests in PIPs as well as investments in PIPs are now treated as chargeable transactions for SDLT purposes. ‘Transfer’ has an extended meaning which is set out in paragraph 14(3A) of Schedule 15 FA 2003.
Paragraph 14(8) of Schedule 15 defines a PIP as ‘a partnership whose sole or main activity is investing or dealing in chargeable interests…’ This would not cover a partnership engaged in owning and managing forestry even though those activities do not amount to a trade for the purposes of section 11 of ITTOIA as the main activity will be selling timber and restocking the land with trees which does not amount to investing or dealing in chargeable interests in land. Such a partnership would not be a PIP for SDLT purposes.
Marilyn Merlot (Ann Humphrey)
First published in Taxation magazine Readers’ Forum www.taxation.co.uk
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