Anyone who is a Buy-to-Let investor holding property personally should consider this possible scenario. It might reduce tax on rental income as well as achieve a CGT free uplift in base cost, while allowing income to be accessed free of tax. This possible solution which uses a LLP might also provide IHT efficiency.

1. Want to Save Income Tax, Reduce Capital Gains Liability and Reduce Inheritance Tax on Buy-to-Let
Property?
Anyone who is a Buy-to-Let investor holding property personally should consider this possible
scenario.It mightreduce tax on rental income as well asachieve a CGT free upliftinbase cost, while
allowingincometobe accessedfree of tax.ThispossiblesolutionwhichusesaLLP mightalsoprovide
IHT efficiency.
Let’s assume the following:
 Anindividual oragroupof individualsownanassetorassetswhichgenerateasignificantlevel
of rental income.Suchincome issubject to higher or additional rates of income tax; and/or
 Significantcapital gainsare inherentinthe property or propertyportfoliooranother class of
asset; and
 The individual or individuals wish to mitigate their ongoing tax liabilities; and
 The individual or individuals are willing to revise the structure through which they currently
operate.
Their objective might simply be achieved by:
1 The individual or individuals transferringthe property into a LLP and operating the business
through this structure. This needs to be done for at least eighteen months and during this
time, the income generated by the business will still be subject to Income Tax.
2 Aftereighteenmonths thebusinessisincorporatedintoaprivate limitedcompany. Thereafter
the profits will be taxable within a corporate structure and profits will be subject to
corporationtax (currently20%) asopposedtothe more punitive personalincometax rates of
up to 45% previously suffered. Profits can then be managed as part of any tax planning
exercise for the individual client.
3 A furtherbenefit arisingfromthisstructure isthatthe assetswill benefitfromanadjustment
to their base cost when they are put into the corporate structure. The values at which the
assetsare carriedinthe corporatestructure isthe marketvalue atwhichtheywereintroduced
to the LLP, as opposedtothe CGT cost previouslycarriedby the individual prior to disposal.
4 The transactioncanbe undertakeninsuchamannerastoallow theprofitsfromthecorporate
structure to be drawn by the individual free of tax for a significant period of time.
5 It also facilitates future IHT planning which may be considered whereby individuals seek to
passassetsto familymembers(notspouse)butare putoff doingsoby the immediate charge
to CGT.
6 Shares/debt in the corporate structure can be gifted in such circumstances with no CGT
charges arising.
Necessary considerations
In makingsuch changes,itis necessarytocarefully considerforwhomthe structure may be suitable.
Quite simply, the structure is suitable for anyone with a property portfolio business that generates
substantial income. There may also be an additional benefit where there are latent gains within the
property portfolio or indeed other assets.
The mainbenefit isareductioninincome tax ratesfrom45% to the muchlowercorporate tax rate of
currently 20% which will reduce further following the last budget announcement. In addition, there
will be no liabilityto SDLT for the transfers of the property or Stamp Duty where the asset is shares
and,importantly,there isanadjustmenttothe base costof the assetcarriedbythe LimitedCompany

2. Inevitably there are of course risks attached, though the risks in achieving the transition of the
portfoliofromthe individualtothe limitedcompanyare relativelylow.There is howeverariskthaton
a subsequent disposal of the assets or the shares in the company there may be a challenge by HM
Revenue & Customs as to the whether there was an earlier disposal.
Turner Little
In our opinion this risk is relatively low. While Turner Little Limited are not tax advisors and would
alwaysrecommendtheirclientstoseekindependenttax advice, theyare expertsinthe formationof
company structures.
Turner Little was foundedin 1998 and it has since become a well-established UK based professional
Company Registration Agents, Registered Bank Intermediaries and Business Consultants, as well as
Trust providers.