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  • Tax

    Using an LLP to mitigate S24

    I have just had a very interesting with my accountant on a work around to my S24 problem.  He has been doing a lot of research, attending professional courses and working with solicitors and he is convinced that by transferring my properties which are jointly owned with my wife to an LLP we can mitigate the tax changes.

    Myself and wife would be the partners in the LLP and as such there would be no need to change the mortgages.  An LLP is an accepted, legal corporate entity so would be able to legitimately claim finance as a business cost.  This apparently only works where the portfolio is of sufficient size to show that it is a full time business (as in the Ramsay case).  In these circumstances there is no SD or CGT to pay whatsoever and I can still keep my cheap mortgage deals.

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    Paul,

    Yes this route does exist, However will your lenders allow you to act as a LLP? might be worth a quick call to them to see their opinions.

    Has he not mentioned the Partnership route to incorporation, i think its a proven route?

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    Hi Paul

    I did the very same exercise as your self and I sort the advice of three accountants

    The Ramsey case is interesting and I will try to explain in easy terms the info I received

    I believe there are different sorts of cases the HMRC allow from time to time But it doesn't become case law

    So the Ramsey case is not 100% safe ad the HMRC have left the door open and I believe allowed it to go through but its not Tax Law

    The problem I found was out of the three accountants there was a different opinion

    With S24 I think a lot of Landlords will try to do what Ramsey Did and My own belief if HMRC will then challenge it

    If it was to work it would be a dream for Landlords

    My own view is I would not use it and it could come back and bite you

    I at great cost have done what I call the Landlord Shuffle selling persona BTL Houses into my own company at market value

    But I wish you luck If I was going down the Ramsey route and paying for advice I would make sure the advisor is full covered by insurance in case the wheel comes off

    so you have redress.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    DL

    HMRC does not "allow" cases like Ramsey.  They fought Ramsey in the courts and lost.  Therefore Ramsey now IS tax law until such time as Parliament chooses to change tax law to reverse the impact of the (binding) Ramsey court decision.  This happens all the time in tax law, by the way. 

    I agree if too many people are able to use the Ramsey loophole then HMRC and the govt will probably move to close or narrow the hole.

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    I would not bet my shirt on this way forward

    I believe its not Tax Law its not a president and the HMRC can challenge this

    I was advised that it was NOT something to do

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Also, let's remember that the "Ramsey loophole" isn't definitive.  

    The onus is on the taxpayer to convince HMRC that her LL role is a business, it doesn't just happen because she works on it for 20 hours per week or something.

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    I don't think a proven route is possible yet? No tax returns have been filed and just because 118 advise not telling your lender doesn't mean they won't find out.

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    In reference to a proven route, I have personally dealt with and seen written HMRC approval on 8 landlords who moved from joint ownership to a limited co structure avoiding stamp duty and capital gains tax. However they were big portfolios in excess of 8 million debts.  Any solicitor and tax advisor dealing with such a case would seek HMRC approval before continuing; Once the move has happened HMRC cant have any redress as they approved the transition in the first place surely.

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    That's interesting! I believe if going through 118 they don't get preapproval from HMRC as they believe that there's nothing contentious to get preapproval on. Cheers.

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    Hi DL

    The Ramsay case was only part of the background.  As I already operate LLP's and Ltd companies and the properties are jointly owned with my wife he deemed that we could swap these to an LLP structure to tidy up our affairs as a legitimate business activity.

    Hi Ishy

    His advice has been that although we could use the LLP as a step to incorporating to  LTD company this should be unnecessary as an LLP is already an accepted corporate entity registered with companies house.

    Hi LordLucan

    I have read page 41 and this seems more aimed at a partnership than a fully registered LLP.  However I will forward this to him for his comments.

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