New queries, issue 4641

Capital idea

Can IHT be reduced by transferring property to limited liability partnership?

My clients are a husband and wife who own a substantial property portfolio and would like to carry out some inheritance tax planning.

A possible strategy has been suggested but has resulted in an argument between tax practitioners. The couple have been advised to set up a limited liability partnership (LLP) into which they would transfer their properties. According to FA 2003 s 65 and as set out in HMRC’s Stamp Duty Land Tax Manual at SDLTM24500 this transfer should be free of stamp duty land tax .

Under ITTOIA 2005 s 863(1)(c) – and see the Business Income Manual at BIM82115 – ‘the property of the LLP is treated as held by the members of the LLP’. Thus the transfers into the LLP should not trigger capital gains tax because the assets...