CGT liability for transfer of beneficial interest into an LLP

Hi there, We would like to create an LLP to manage a rental business, and want to transfer the beneficial interest of a property which is currently 100% owned by my father into this LLP. The desire is to share a portion of the rental income from this property between the members of the LLP (there will be three of us, including my father), according to the contributions made in managing this property, balanced against the equity my father owns in the property. I understand that this is achieved by transferring the beneficial interest in the property from my father to the LLP by means of a Beneficial Interest Transfer Agreement or Deed of Assignment (not sure if these are actually the same thing). We have had the property valued, and the desired outcome is that my father will, upon transfer of the property, still retain legal ownership, but also 100% ownership of the equity, as his capital account in the LLP will reflect the value of the property on the day of transfer. My questions: 1. Is there any CGT to pay in this situation? 2. What information do we need to provide to HMRC before, during or afterwards? 3, Would be any Stamp Duty due on this transfer of beneficial interest?

Hi,

1. No CGT as is it just the beneficial ownership at this time.  
2. You need to supply a copy of the transfer agreement/deed of assignment.  
3. You would need to check the the Stamp Duty Office on:

Stamp Duty on shares: general enquiries

Thank you.

Hi, Many thanks for your response, Could you advise where we should send the copy of the deed of assignment please? There seem to be other responses on the forum from HMRC that indicate that unless the transfer is between married couples (where a form 17 should be used) there is no need to send HMRC a copy: e.g. https://community.hmrc.gov.uk/customerforums/ifp/678a395c-5b79-ed11-97b0-00155d9c7b3d) Many thanks.

Hi,

We would still require sight of the declaration to note on any records that there has been a change for any future potential capital gain charges. This should be sent to:

HMRC,
PAYE & Self Assessment,
BX9 1AS

Thank you.

Thanks again for your response. I was wondering if you could provide a link to the legislation or guidance that actually REQUIRES this information to be sent to PAYE & SA please? I can't seem to find any references to anything that makes it a legal requirement to send in the transfer agreement (no forms or guidance etc), and as I indicate above, your request seems to conflict with other advice given by HMRC elsewhere on the forum which states that we should keep the document as part of our own records should it be required (as evidence of the transfer, at a later date, if/when required). We'll be completing a SDLT1 form to claim stamp duty relief on the transfer, as per the Stamp Duty Land Tax guidance. But I can't find any reference to anything relating to PAYE & SA. Is this just a "nice to do", or actually a requirement? If it's actually a requirement can you direct me to the relevant regs/legislation please? (I'm just trying to learn about all this stuff to be better informed about the relevant regulations and legislation). Thanks again.

Sorry to interuot but I believe you've been given incorrect information. If your father is disposing of the beneficial interest to an LLP then he won't own the property or any income from the property, the LLP will. Nor will he be able to dispose of his beneficial interest if there is a mortgage on the property (at least not without repaying the mortgage). It is also the transfer of beneficial ownership that is relevant for CGT (legal owner is just a formality, it is the beneficial owner that is the real interest and that tax is concerned with). So disposing of the beneficial interest will give rise to CGT. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg70230 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg11700p

Hi,
This is required as your father is still the legal owner of the property and if sold, he would be liable to pay capital gains on any increase in value. by transferring any beneficial ownership this then changes the charge due for the gain and HMRC need to be aware of this:
70230
Thank you.

There seems to be conflicting advice here. I understand CGT is payable on the gain in beneficial capital interest, so a disposal - including a transfer to a LLP - would attract the capital tax. There is a change of ownership ( sole owner to LLP) and a disposal ( deemed market value), so there must follow CGT on any gain? Please clarify.

Hi
Yes this is seen as a disposal so liable to CGT.