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LLP-BTL Properties

Family LLP-BTL properties

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  • H&W jointly own BTL properties.
  • H&W wish to form a partnership (GP or LLP) together with their adult sons and move the properties to the partnership.
  • Income & capital gains to be shared equally between ALL partners.
  • Their sons do not have properties to move to the partnership.
  • The capital accounts of H&W at the start of the partnership will be (we assume) the net values of the BTL properties.
  • The capital accounts of the sons will be nil at the start of the partnership.
  • We understand that H&W cannot draw /reduce their initial capital for at least 3 years (Anti avoidance rules under FA2003 Sch.15-17A).

We understand that there will be no SDLT issues (relief under FA2003 Sch.15 para10).

Questions:

1-Are there any other anti-avoidance rules that we need to be aware of as H&W are effectively shifting some of the future income & Capital gains to their sons?

 

2-Any problems if H&W insert a clause in the partnership preventing the sons from drawing their share of profit (less tax) until their capital accounts reach a certain amount?

 

3-Can the percentage for sharing income be different from that of sharing capital gains?

Replies (2)

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By David Ex
08th May 2022 15:13

MHAJ wrote:

we assume

Never proceed on the basis of assumptions. If the amounts involved are material would strongly suggest you take some heavyweight advice to avoid potential problems now and in the future.

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By The Dullard
08th May 2022 17:23

On 1:

Why (and how) are H&W shifting FUTURE capital gains to the sons? Surely they realising gains currently to the extent that the sons are obtaining effective interests in the properties.

And... ITA 2007, Pt 13, Ch 5AA.

And... Have you thought about IHT?

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