Stamp duty on Partnership interests note

UK Government pushes forward with proposal to abolish UK stamp duty on the transfer of a partnership interest

As part of a broader consultation on the modernisation of UK stamp duty published in April 2023, the UK Government has proposed removing the transfer of partnership interests from the scope of UK stamp duty. In its consultation response published in April 2025, HMRC confirmed that it will proceed with these proposals, having found support from 83% of respondents. This simplification is welcome news for investors and fund managers carrying on secondary transactions with a UK nexus. Further details are provided below.

The current rule

Transfers of partnership interests are currently subject to UK stamp duty when the partnership holds stock or marketable securities. The stamp duty rate is generally 0.5% of consideration paid for the partnership interest.

A common approach to prevent the application of UK stamp duty is to execute the transfer documents outside of the UK. Provided there is no other UK nexus to the transaction, this ensures the transaction occurs outside the territorial scope of UK stamp duty. However, signing outside the UK comes with its own set of challenges. Additionally, if either party is a UK resident, there can often be a risk of the UK territoriality nexus applying.

This stamp duty rule has been particularly relevant to secondary transactions, where the transfer of a limited partnership interest could give rise to UK stamp duty. The Market position has been that stamp duty is not ordinarily paid, on the basis that stamp duty is a voluntary tax. However, stamp duty would likely need to be paid, if a dispute arises between transferor and transferee, and in accordance with the PSA, the English courts have exclusive jurisdiction to settle any dispute or claim between the parties. In such case, the stamp duty would need to be paid as the English courts would not accept an ‘unstamped’ document as evidence. 

Given this uncertainty, the PSA typically includes complex tax provisions to cater for scenarios where stamp duty becomes payable, of if stamp duty needs to be paid in a dispute scenario should the documents need to be presented before the English courts.

Government proposals

In a response to consultation feedback published at the end of April, the Government has confirmed that it will proceed with plans to remove the transfer of partnership interests from the scope of UK stamp duty.

The consultation document states that the government is aiming to implement these changes by 2027. It is important to note that the consultation document states that the legislation will introduce an anti-avoidance rule to prevent partnerships from being used as a method of transferring shares free of stamp duty.

More broadly, this change will be welcomed by investors and fund managers engaged in secondary transactions, as it will remove obstacles to using an English limited partnership, and/or choosing the English courts as the jurisdiction to resolve disputes in a secondary scenario.