Readers' forum : Capital idea

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 it 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) – see HMRC’s 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 have not changed ownership. So far all this is straightforward.

Then the theory goes the LLP will...