Having a portfolio of 6 properties should i form an LLP or not
Tax Planning and Financial

1 Thanks
13 Posts
8 months ago

1.    The third option would be to form an LLP (with one or more of the children). The main points to note here, are:
1.    The LLP can be structured in such a way so that the entire present and future value of the properties will fall outside of your estate for IHT purposes after 7 years.
2.    There will be some tapering of the tax which would fall due after just 3 years.
3.    A 7-year life insurance policy can be taken out to cover that 7-year period (subject to underwriting, the premiums are likely to be a lot lower than for whole of life cover and, of course, you only have to pay them for up to 7 years).
4.    As a member of the LLP, you could choose to retain all of the rental income or share some of the rental income with the other members (the children).
5.    The LLP, as a separate legal entity, will pass onto your children immediately once you have passed away without the need for a Grant of Probate.
6.    Should you require long term care in the future, the assets within the LLP should not be taken into account for any financial means assessment.
7.    Of course, should you choose to purchase additional properties in the future, they would be purchased by the LLP and would not form part of your estate for IHT purposes. 
8.    If you owned a minimum of 5 rental properties, you could look at incorporating the LLP into a limited company:
1.    This historic capital gains imbedded in the portfolio would be wiped out meaning if the company sells a property in the future, it would be more tax efficient.
2.    There would be opportunities to look at pension contributions meaning any corporation tax liability would be reduced.
3.    IHT planning options with a company are “quicker” than with an LLP – within 2 years of incorporating, IHT could be mitigated in full. 
4.    If you were to transfer your mortgages to a corporate mortgage, the mortgage interest can be offset against corporation tax.

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