With all the recent changes in Property Investment Tax rules some investors have sought to move their property investments into LLP’s
Limited Liability Partnerships have largely been ignored by HMRC and untested with case law (so there is a risk that HMRC will start to pay more attention to them if they grow in popularity).
LLPs could have some benefits, especially for Inheritance, let’s look at the advantages:
- If you had a property portfolio with potentially large capital gain you could move the property to the LLP as equity capital introduced (be careful on how the LLP agreement is written) and in theory this wouldn’t create a capital gain (CGT)
- The LLP will show the full value in their accounts including the gain
- Then you can add other family members
LLP’s are also being used as a stepping stone to incorporation.
S162 Incorporation Tax Relief would probably be available once the LLP has been trading for a while
Can a Residential Property Investor use Incorporation Tax Relief?
SDLT will probably not apply
Where the transferor is a partnership, this normal rule is overridden by the prescriptive rules in FA 2003 Sch 15. The impact of these provisions can be that to the extent the company is connected with the partners making the transfer, no SDLT may arise. https://www.taxjournal.com/articles/incorporation-buy-let-business-10062015
There are specialists offering solutions such as Property 118 – but the fees may out way the benefits for many investors
LLP structure reduces landlords tax bill by 85% – CASE STUDY
Holding property in companies is definitely the future for residential property investment
I would recommend a company for each property as this should make it easier for lenders to take a charge and creates the opportunity to sell the company rather than the property within it.
You can then have a holding company.