Budget: charges on transfers of an interest to be removed

Law firms planning to admit new partners and partners with a share in office property who are thinking of leaving or retiring should delay the move to take advantage of changes announced in last month's Budget, it has been claimed.


Colin Ives, a tax director at accountancy firm Smith & Williamson, said: 'Previously, partners who owned their office premises could end up with a very hefty tax bill when one of their fellow partners joined, left or retired from the partnership. This tax charge will be lifted with effect from Royal Assent to the Finance Bill 2006.


'The obvious point coming out of this is that if any partners who have a share in office property are thinking of admitting new partners, leaving or retiring, they should try and delay a few months - at least until the Finance Act 2006 is enacted.'


Under the stamp duty land tax (SDLT) rules introduced in December 2003, all properties used by a partnership and owned by a partner or partners were liable to SDLT on every change to the partnership/profit share.


Following the Budget, these charges will no longer apply to transfers of an interest in a partnership, if the partnership property includes land. However, the changes only cover partnerships whose main activity is the carrying on of a trade - other than a trade of dealing in or developing land - or a profession.


Kevin Martin, Law Society President, said: 'This is great news for our members in many legal partnerships. We have been pressing HM Revenue & Customs for some time to ensure that SDLT is applied reasonably.'