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Where Taxpayers and Advisers Meet

LLP's and CGT

Plantman
Posts:1
Joined:Wed May 10, 2017 11:02 am
LLP's and CGT

Postby Plantman » Wed May 10, 2017 11:09 am

We run a wholesale nursery business based on agricultural land and are in LLP partnership with the land owners on an 11 /89% share. The business pays for the use of the land through a profit split at the above rate. The landowning partners have the 11% share and do not have any input into the business other than providing the land. The land is separate from their dwelling.
The landowners are seeking to the sell the land, preferably for development, but the partnership agreement precludes the sale of the land whilst the business is in occupation. The 89% partners wish to sell the business on the land in order to retire from it and have two potential purchasers waiting to buy.

The sale of the land alone, would benefit only the landowning partners. They are unwilling to pay sufficient compensation to incentivise us (89%partners) to give up the business.
It is in our interests therefore to pursue the sale of the business assets to the third party.

The question is therefore:

Are there any financial or tax benefits to the partners on either (11 or 89%) side if the LLP buys the land from the 11% partners (who would then resign their partnership) before the LLP then re-sold the whole (business + land) to the new purchasers?

As an alternative to this outright purchase by the new party, would it be preferable to incorporate them into the LLP as New Partners with a gradual transfer of assets or share in the form of an earn-out? How would this method affect the need to pay either CGT or Land Tax Stamp Duty? Would the 89% partners have a CGT liability if they acquire the share of the 11% partners?

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: LLP's and CGT

Postby AnthonyR » Sat May 13, 2017 4:42 am

The issues you've got here are probably a bit complex to get much of a detailed (and free of charge!) response on a tax forum. Hence the silence.

The bottom line is that there are a number of matters to consider, including the entrepreneurs relief positions for both parties, which can be particularly complex for farming businesses and partnerships/LLPs add a further level of complication.

The simplest route would probably be to buy the land from the other partners then sell the business as a whole, as at least then you are in control of the process and hopefully everyone wins. The issue is going to be whether you can finance the purchase of the land.

Bringing in external partners with a periodic buy in is a possibility but would depend on whether they would agree to this and the numbers.

Without knowing a huge amount of additional detail it's going to be difficult to give any definitive answers and you'd need to run the numbers for everyone in every circumstance to compare.

As such my advice is probably to seek advice from someone who understands farms, CGT and LLPs in reasonable detail, pay for some advice and then put together a plan based on that.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: LLP's and CGT

Postby AnthonyR » Sat May 13, 2017 4:44 am

Just re-read it's a nursery rather than a farm, but still issues around the use of the land itself.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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