Sarah Bradford highlights a tax avoidance scheme being marketed at landlords and explains why it should be avoided.
HMRC has recently published a ‘Spotlight’ (Spotlight 69) drawing attention to a tax avoidance scheme targeted at landlords.
The scheme involves the transfer of the landlord’s property business to a limited liability partnership (LLP), which is subsequently liquidated, to avoid capital gains tax (CGT) on the eventual disposal to a limited company. However, in HMRC’s opinion, the scheme does not achieve its desired objective and anyone using the scheme will be liable for interest and penalties on the tax they sought to avoid, as well as the tax itself.
Legislation introduced in Finance Act 2025 ensures that a CGT charge now arises on a member who contributes assets to an LLP which is then liquidated in their favour or in favour of a connected person.
