HMRC has warned landlords against a tax avoidance scheme that claims to reduce their tax liability. The scheme involves transferring properties to a limited liability partnership (LLP) with a corporate member. The LLP then allocates profits on a discretionary basis to members.
HMRC says that the scheme does not work and that landlords who use it may have to pay more tax than they tried to avoid. The scheme is also caught by a number of anti-avoidance rules.
HMRC is urging landlords who are using the scheme to withdraw from it and settle their tax affairs. Landlords who are concerned about the schemes they are currently using should also consider getting independent professional tax advice or speaking to a tax charity such as TaxAid.
Promoters of the scheme are also warned that they must comply with the disclosure of tax avoidance schemes (DOTAS) legislation. Promoters who fail to disclose the scheme to HMRC may be liable to a penalty of up to £600 a day or even £1 million.
If you are concerned about a tax avoidance scheme, you can report it to HMRC anonymously using the online form or by phone.
For more information visit: https://www.gov.uk/guidance/property-business-arrangements-involving-hybrid-partnerships-spotlight-63
