A partnership plan

I act for a four-person trading partnership (mother and father plus two sons).

The entity is very successful posting annual profits of approximately £400 000.

When this is combined with other income the individuals are exposed to the new higher rate taxes.

Incorporation is the obvious tax-saving solution but because of issues surrounding benefit-in-kind rules the clients do not wish to transfer outright to a limited company.

The client has suggested setting up a limited company which would become a partner alongside the other family members.

The shareholders in NewCo would be the existing partners.

This would result in the company’s share of profits being assessed at the lower 21% rate rather than the 51% applicable to the individuals.

I perceive the following difficulties.

1. Settlements legislation regarding the transfer of profit sharing to the company.
2. Capital gains issues regarding...