Family owned business operating through an LLP for three years. Previously a standard partnership.
Father now wishes to exit and has accepted a settlement of £36k to clear his member's capital account which stands at £60k - this will be paid out of the LLP, ie there is no incoming partner/member. Undrawn profits, ie Loans and Other Debts due to Members is being repaid in full. Goodwill is not being considered.
For an LLP what is the accounting procedure for this capital write-off?
For tax purposes, presumably there is a CGT loss to claim of £24k and no other considerations?
thanks.
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For tax purposes, presumably there is a CGT loss to claim of £24k and no other considerations?
Doubt it. Looks more like a gift. Certainly a non-arm's length transaction with (presumably) a related party.
yes good point. other members are adult son and daughter in law. father is wanting exit due to health reasons and has accepted settlement based on funds available.
how about the accounting treatment?
how about the accounting treatment?
No idea but my guess would be that the other partners' accounts are increased accordingly. That would (and again I am guessing) mean that somewhere down the line they may be taxed on the £24k.
It might have been better to withdraw the full amount of his capital and then gift £24k for the other partners to introduce.
That's a lot of guess work, mind you.
