Moving from a limited company to a partnership

Moving from a limited company to a partnership

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Hi all

This might sound like a bit of an odd idea, but I want to see whether something that came up in a conversation the other day is actually viable. 

Say a client, called Mr A  & Mrs A run a Limited company A Ltd which has some expensive initial startup plant & machinery but in its first year of trading saw very little revenue coming into the business, leaving A Ltd with say £38Ks worth of losses due to its claim on AIA. 

Mr A has an other employment which leaves him as a higher rate tax payer and he would really like to offset some of these losses against his personal tax bill.

Could the following be considered to be a legitimate business model?

Mr A sets up a partnership with Mrs A which runs the manufacturing and trade sales of the business. The partnership buys the plant & machinery from A Ltd at market rate so that the losses can be utilised in a more tax efficient manner, setting the losses between Mr & Mrs A as seems most suitable at the start of each tax year. 

A Ltd continues to trade but does not handle the manufacturing or trade sales as originally intended, and merely sells to retail, buying stock from the partnership when it needs to, allowing for some of the remaining losses to be soaked up.

Can this sort of arrangement work?

Cheers

Phelan

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By geoffwolf
18th Aug 2014 14:23

the flaw here

is that the losses have already been incurred and are presumably too late to be set against the higher tax income of Mr A.

 

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