HMRC cracks down on LLP liquidation schemes

These arrangements typically work by:

• Setting up an LLP and transferring property into it at market value.
• Initiating a Members’ Voluntary Liquidation (MVL) after a short period.
• Selling the properties to a connected company owned by the landlord.

Scheme promoters have marketed this process as a way to avoid CGT, bypass Stamp Duty Land Tax (SDLT), and even claim Inheritance Tax (IHT) advantages through Business Property Relief. However, HMRC has made it clear that these schemes do not work as intended, and participants may face unexpected tax liabilities.

To combat these arrangements, HMRC has introduced section 59AA into the Taxation of Chargeable Gains Act 1992 (effective for MVLs from 30 October 2024). Under the new rules:

• Capital Gains arise immediately when properties are contributed to the LLP — not when the LLP liquidates.
• Participants cannot defer the gain or avoid tax through liquidation.
• Significant CGT charges could arise, alongside possible penalties and interest.

If you’ve used, considered, or been advised to use a scheme like this, you should take advice. At Old Mill, our tax advisers will:

✅ Review your position — analysing any potential exposure to CGT, SDLT, or penalties.
✅ Engage with HMRC on your behalf — helping to regularise your position if needed.
✅ Advise on settlement strategies and alternative planning options.
✅ Mitigate risk — ensuring compliance while preserving as much value as possible.
✅ Provide proactive planning — helping you structure your property and business affairs efficiently going forward.

Tax issues can escalate quickly, but with the right advice, they are manageable. We have extensive experience in dealing with HMRC investigations, disclosures, and settlements.

Get in touch with Old Mill’s tax team today. Whether you are concerned about past transactions or need help planning for the future, we’re here to provide the clarity, expertise, and reassurance you need. Click here…