Our site uses cookies

I agree Our site saves small pieces of text information, called “cookies” on your device. Find out more in our cookie policy. You can disable the usage of cookies by changing the settings of your browser. By continuing to browse the site you are agreeing to our use of cookies.

Inheritance tax and partnerships

The decision to operate a business as a partnership or through an LLP is often tax driven.

Partnerships and LLPs are often described as being “tax transparent” because the income and gains generated by the business are taxed in the hands of the partners or members, rather than taxed both at “entity” level and then again in the hands of the individual owners (as would be the case for a company). Although increased income and capital gains tax (CGT) rates for individuals may now make tax transparency less attractive than in previous years, it may still have advantages in some circumstances. By using a partnership or LLP, there may also be significant employer's National Insurance savings where the highly remunerated individuals are remunerated by way of profit share, rather than salary.

As well as considering the income tax and CGT position, it is important not to overlook the potential IHT implications of a structuring decision. BPR is a generous relief from IHT from which partners of partnerships and, more recently, members of LLPs have greatly benefitted and there is undoubtedly scope to use partnerships and LLPs efficiently to mitigate IHT. However, as will be seen, care is needed to ensure that the availability of BPR is not compromised when making structuring decisions.

Read the briefing in full below.


Related Expertise

Private Wealth Professional Practices

Related in depth posts

The Court of Protection and the vaccine: to administer or not to administer

The Court of Protection and the vaccine: to administer or not to administer - Nicola Boulter considers two recent Court of Protection decisions.

Professional Practices Alliance Webinar: Neurodiversity in Professional Services Firm Leadership

The Professional Practices Alliance hosted an extremely interesting webinar on neurodiversity in leadership on Wednesday 16 June. Corrine Staves shares her highlights.

No-one expects a 1975 Act claim......

Two decisions under the Inheritance (Provision for Family and Dependants) Act (enabling a spouse/civil partner and others, to bring a claim if a Will fails to make reasonable financial provision for that person) have produced very different results.