IHT BPR & LLPs

IHT BPR & LLPs

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Two individuals are forming an LLP to purchase land and, in due course, run a 'conservation camping' business on the land. The LLP will own the land.

Subject to the usual investment v trading issues in terms of determining the whole or main activity of the business, and two year ownership etc., it is anticipated that each member's share in the business would qualify for IHT BPR as an interest in a business per section 105(1)(a), IHTA 1984.

However, as I read section 267A(a), IHTA 1984, the LLP's property is treated for IHT purposes as the property of its members; thus, is the rate of BPR relating to the LLP's land limited to 50% by section 105(1)(d), IHTA 1984 even though the land is owned by the LLP ?

I can't believe that that is the case, as I had understood that the purpose of section 267A would, among other things, ensure that BPR would be available to LLP members on the same basis as 'ordinary' partners, but I am struggling with the analysis and wondered whether anyone can help put me right.

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By MBK
17th Feb 2012 08:24

I think you are focussing on the wrong bits of the legislation.

It seems to me that the relevant part of S267A is Ss (b) - which states that "any business carried on by a LLP shall be treated as carried on in partnership by its members." Ss (a) is concerned with property owned outside the LLP but used / occupied by the partnership - although reference to "property to which the LLP is entitled" does make it confusing!

Once you get within Ss (b) what each partner then has is an interest in a partnership business - which then falls squarely within S105 (1) (a) and is eligible for 100% BPR.

I've checked this against the LLP manual we use and it supports the above - stating that the effect of S267A is to treat LLPs as partnerships. I think you would accept that a partnership interest (including any land value comprised within that interest) will qualify for 100% BPR.

 

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