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Incorporation relief

Incorporation relief

If an LLP has 4 partners and two of those partners set up companies to receive their share of the partnership profits the two partners are effectively transferring their interest in the LLP to their own companies, the two individuals I assume will then need to resign from the LLP and the Companies will have to be appointed.

My doubt is over the capital gains tax treatment, are the two retiring partners subject to CGT on the transfer of their LLP shares to the companies or is incorporation relief available to ensure that there is no chargeable gain?

I don't believe incorporation relief can be due as it is not the transfer of a whole business to the two companies, any thoughts please?


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01st Jun 2012 21:33

There is an opportunity to take a goodwill uplift on incorporation of the profit shares. You should agree these with HMRC. This will give rise to CGT charge at 10% but the saving should be significantly more than this.

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