Family LLP or not for rental properties?

Visa_king
Visa_king Posts: 7
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edited 23 October 2023 at 8:48AM in Cutting tax

Hi,

I own 5 properties in my personal name for over 15 years (1.5 capital owned) and did not incorporate over section 24 a few years ago.

I am married and now have 2 kids. I am looking into setting up a Family Limited Liability Partnership to furtureproof the properties for my family and to aid in tax savings.

I have made profesional connections into this and been told around £10-15k will set this family LLP up and about the advantages in reduced tax and zero inheritance tax for the kids as they naturally take it over when I die. However, all sounds too good to be true so I'm reaching out for anyone who has set one up and their experiences and/or any professionals who can simply say yay it's not a tax avoidance scheme OR Och, watch out.

Thanks in advance.

My opinions are exactly what you would expect, my own...

Comments

  • I have an LLP with the kids. It cost me £25 to set up in 2016 and then around £30 per year to run (Companies House and tax return software). But there are no tax advantages for us (income, CGT or IHT). And it wasn't set up with tax advantages in mind.

  • Visa_king said:

    I have made profesional connections into this and been told around £10-15k will set this family LLP up and about the advantages in reduced tax and zero inheritance tax for the kids as they naturally take it over when I die. However, all sounds too good to be true so I'm reaching out for anyone who has set one up and their experiences and/or any professionals who can simply say yay it's not a tax avoidance scheme OR Och, watch out.

    I understand now.  I think it is more of a case of don't touch, even with a very long barge pole: https://www.gov.uk/guidance/property-business-arrangements-involving-hybrid-partnerships-spotlight-63
  • Grumpy_chap
    Grumpy_chap Posts: 14,427
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    Visa_king said:

    Hi,

    I own 5 properties in my personal name for over 15 years (1.5 capital owned) and did not incorporate over section 24 a few years ago.

    I am married and now have 2 kids. I am looking into setting up a Family Limited Liability Partnership to furtureproof the properties for my family and to aid in tax savings.

    I have made profesional connections into this and been told around £10-15k will set this family LLP up and about the advantages in reduced tax and zero inheritance tax for the kids as they naturally take it over when I die. However, all sounds too good to be true so I'm reaching out for anyone who has set one up and their experiences and/or any professionals who can simply say yay it's not a tax avoidance scheme OR Och, watch out.

    Thanks in advance.

    You own these properties now in your personal capacity (Visa_king as the legal entity).

    If you now create a new legal entity (King Family LLP), do the properties need to be sold from the current legal entity to the new?  If so:
     - current legal entity will be liable for CGT now on disposal of the properties
     - new legal entity will be liable for stamp duty now on the purchase.  This is an additional tax now that needs to be set against possible future tax savings.

    Has a professional advisor confirmed the "zero inheritance tax" status?  I would have assumed that the King Family LLP would have four partners (OP, OP's wife, child 1, child 2).  At death of OP, the OP's ownership of assets in the LLP would become part of the OP's Estate and subject to IHT calculation.

    I am not expert with LLP rules, so the key word in my comments above is very probably "assume" and we all know what that did to U and Me.
  • I’ll not comment on the scheme but ………10 - 15k !!!!????

    Thst is extraordinarily expensive.

    Oh - and tax avoidance is perfectly legal! Tax evasion is a different story!
  • Visa_king said:

    Hi,

    I own 5 properties in my personal name for over 15 years (1.5 capital owned) and did not incorporate over section 24 a few years ago.

    I am married and now have 2 kids. I am looking into setting up a Family Limited Liability Partnership to furtureproof the properties for my family and to aid in tax savings.

    I have made profesional connections into this and been told around £10-15k will set this family LLP up and about the advantages in reduced tax and zero inheritance tax for the kids as they naturally take it over when I die. However, all sounds too good to be true so I'm reaching out for anyone who has set one up and their experiences and/or any professionals who can simply say yay it's not a tax avoidance scheme OR Och, watch out.

    Thanks in advance.

    You own these properties now in your personal capacity (Visa_king as the legal entity).

    If you now create a new legal entity (King Family LLP), do the properties need to be sold from the current legal entity to the new?  If so:
     - current legal entity will be liable for CGT now on disposal of the properties
     - new legal entity will be liable for stamp duty now on the purchase.  This is an additional tax now that needs to be set against possible future tax savings.

    Has a professional advisor confirmed the "zero inheritance tax" status?  I would have assumed that the King Family LLP would have four partners (OP, OP's wife, child 1, child 2).  At death of OP, the OP's ownership of assets in the LLP would become part of the OP's Estate and subject to IHT calculation.

    I am not expert with LLP rules, so the key word in my comments above is very probably "assume" and we all know what that did to U and Me.
    Unfortunately, I am an expert on the LLP rules and quite a lot of that is not right (e.g. LLP won't pay CGT as it is the responsibility of the members, unlikely to be SDLT with a family partnership).  The LLP does not improve the IHT position compared with doing exactly the same commercial thing outside of the LLP.  If there is a mortgage on the properties, tread very, very, very carefully and don't trust the promoters if they say "you don't need to tell the lender" as that can mean mortgage fraud.  If it is one of the schemes covered by the HMRC spotlight, do not touch it in the slightest as you will be completely screwed.
  • All over the internet to NOT go anywhere near an LLP scheme for help with landlord tax Less Tax for Landlords: the £50m landlord tax avoidance scheme that HMRC say doesn’t work, and can trigger a mortgage default. – Tax Policy Associates Ltd.

    If you meet the criteria you might be able to incorporate BUT you can't have any other job because you have to be able to devote a minimum of 20 hours a week to it in order for it to be considered a "business". Lots of other pitfalls too.
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