I have a client with 2 LLPs, which are mixed partnerships. The one individual partner is the sole shareholder of the corporate member.
The LLPs hold investment property, on which they receive rent.
All profits / losses have always been allocated to the corporate member.
I can't see any way of escaping the new rules on mixed partnerships, but is anyone aware of any way round the rules? Is it enough to show that the reason for the way the LLPs were set up was for business purposes (I've been told this was the case but don't have any firm information to back this up at the moment), and not for tax motivated reasons?
The only options at the moment seems to be to sell the properties to the Limited Company and to suffer the CGT, or to swallow the IT charge on the individual partner.
Any comments would be helpful.
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CGT can be avoided...
... using incorporation relief thanks to Elizabeth Moyne Ramsay. You need the corporate partner to resign first though, because relief under TCGA 1992, s. 162 isn't available to companies and s. 139 won't apply, because s. 137 won't be satisfied.
The SDLT's more tricky (it's a market value transfer, irrespective of any actual consideration), but it's worth noting that an LLP is treated as a company (and can be the parent company of a group) for SDLT group relief purposes. FA 2003, Sch. 15 needs working through, because an LLP is treated as a partnership for the purposes of that schedule.
It feels a bit weird, but you can have a single member LLP after it's been incorporated (you only need at least two members on incorporation).
There should be no SDLT problems on incorporation
Per the link below, but you should get an SDLT specialist to advise on this.