A shift too far?

My client Mr A is one of two partners in a limited liability partnership (LLP); his income share is about £100 000 per year. He set up a limited company many years ago to deal with a different strain of service business and this receives an income of about £50 000 per year.

The work of the company is carried out by the employees and partners from the partnership. No charge is made to the company for this service.

Mr A has transferred 100% of the company as an outright gift to his wife who takes a dividend. The company has virtually no costs of its own and it bills approximately 100 individuals for the services that it provides.

The company has net assets of about £50 000 (consisting of debtors and cash less corporation tax) and the two LLP partners are its only directors. The partnership...