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LLP Revaluation Reserves - Distributable?

LLP Revaluation Reserves - Distributable?

A client has been advised by a tax planning expert that they should invest property into an LLP.

The main advantages being sold to our client are: -

No double tax on exit; LLP interest uplift on death; and that revaluation reserves are distributable and can be used to return capital invested tax free.

I do not see that a revaluation reserve can be paid to the member as a return on their capital invested.  Confirmation/correction appreciated!

Any other advantages/pitfalls not widely known?

Many thanks


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04th Apr 2012 12:58

The concept of distributable profits...

... doesn't apply to an LLP. The members can take whetever is available in cash. But, of course, creating a revaluation reserve doesn't generate cash.

The advantage is that if, after several years, the value has gone up then the property could be mortgaged or remortgaged and the proceeds can be paid out to the members without any issues. That is possible, but more dificult (and involves a tax charge) in a limited company.


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