FTT clarifies the existence of a partnership for LTT purposes

The recent First-tier Tribunal (FTT) decision in COMFG Holdings Ltd v Welsh Revenue Authority addressed whether the sale of a commercial property by trustees (two individuals and a professional trustee) of a Small Self-Administered Scheme (SSAS) to a company they controlled qualified for partnership relief under the Welsh Land Transaction Tax (LTT) partnership rules. The taxpayer, having paid £142,750 LTT on the £2.75 million acquisition, later amended the return to claim a full refund, arguing the property was acquired from a partnership and thus no LTT was due under the partnership relief provisions.

Although the case was procedural, part of the FTT’s approach was to determine whether there was any evidence the sellers were in a partnership to assess if the taxpayer’s claim had a realistic prospect of success. The FTT concluded in favour of the Welsh Revenue Authority (WRA), striking out the taxpayer’s appeal.

The taxpayer argued that partnership relief should apply, claiming the two individual trustees operated an ‘investment partnership’ by managing the property as a business in common with a view to profit, separate from the professional trustee and principal employer. They asserted their investment activities met the legal definition of a partnership.

The FTT, however, found the property was held and managed solely within the SSAS trust structure, as evidenced by the trust deed, scheme rules, sale documents and scheme accounts. There was no partnership agreement, partnership accounts or partnership tax filings, and all property income went into the SSAS fund, not to the individuals. The FTT concluded the trustees acted only in their trust capacity, the property was not ‘partnership property’ under the LTT rules, and the taxpayer’s claim was without merit.

This decision is significant beyond LTT, as the partnership relief rules are substantially the same for Stamp Duty Land Tax (SDLT) and Land and Buildings Transaction Tax (LBTT). It highlights two key points:

• Partnership relief can offer substantial tax savings, but this case underscores the need for evidence that a partnership exists - claims must be robustly supported to avoid being struck out; and
• While the FTT did not rule on the broader legal question of whether SSAS trustees can ever sell as partners, it noted ongoing related litigation and that HMRC have applied to join three similar appeals, signalling this remains a live issue for future cases.

For further information please contact:

• Simon Yeo
• Michael Hope