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bigduckontax
bigduckontax, Accountant
Category: Tax
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If the ownership of the parcel of agricultural land is transferred

Customer Question

If the ownership of the parcel of agricultural land is transferred to an LLP where the partners are the two original owners is there tax to pay? Would there be tax to pay if only the beneficial interest in the land but not the ownership was transferred to the LLP.?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Unlike a company a LLP is not a separate entity for income tax purposes. Profits and losses are passed through directly to the partners. Thus the transfer of the land holdings by the original participants into an LLP where they are the same partners would not create a gain taxable under the UK CGT regime. Thus in both the scenarios presented in the question there is no CGT liability created.
I do hope that I have been able to set your mind at rest on this matter.
Customer: replied 2 years ago.

Thank you very much for your very succinct answer.

The gov.uk site states that an LLP is for "two or more persons associated for carrying on a lawful business with a view to profit".

In your view is the mere holding of an interest in agricultural land by the LLP sufficient. The land would eventually be sold at a profit in some years time.

Expert:  bigduckontax replied 2 years ago.
Yes, I am of the opinion that such a course of action complies and the holding sufficient.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.

My wife and I have decided to transfer our agriculural land which we own jointly to a simple partnership (not an LLP) comprising us two as partners.. We need evidence, i.e. an agreement, that the transfer has taken place. Is it sufficient to say e.g. "I, Mrs A of xyz do hereby irrevocally transfer half of the beneficial interest in the land I own at (description) to the C Partnership for nothing of monetary value. And the same for Mr. A. I know this has to be signed as a deed..

Expert:  bigduckontax replied 2 years ago.
You could do a straight Land Registry transfer if it were registered land. Otherwise it would be better to employ a solicitor to arrange the conveyance to ensure that everything is correctly transferred.
Customer: replied 2 years ago.

Sorry I misled you. We are not making a transfer of ownership, only the beneficial interest in the land. The Land Registry would not be involved. I think the only point I need to clear up is that since the transfer is from two people as owners to the same two people as partners does there have to be any consideration for the transfer of beneficial interest to make the contract valid.

Expert:  bigduckontax replied 2 years ago.
Correct, or at worst a peppercorn consideration.