Mixed partnerships and CGT incorporation relief (TCGA 1992 section 162) – a change of view by HMRC

HMRC has indicated a change of view in its approach to the availability of TCGA 1992 section 162 relief where a ‘mixed partnership' (LLP) ie one including both individuals and a corporate member incorporates the partnership business into the existing corporate member. In correspondence with the CIOT in 2014, HMRC confirmed that, subject to all the other conditions being satisfied, they would accept that TCGA 1992 section 162 can apply to the individual members where an LLP transfers its business to the corporate member in exchange for shares in the corporate member.

However HMRC have changed their view. HMRC’s revised view is that section 162 cannot apply because the whole assets of the business have not been transferred. HMRC state that their revised view applies to incorporations from 30 April 2016. HMRC have confirmed that as the revised interpretation of the availability of section 162 relief and mixed partnerships will apply to incorporations from 30 April 2016 no grandfathering provisions for earlier incorporations are considered necessary. 

The CIOT has written to HMRC to request that consideration should be given to a specific statutory relief so that section 162 TCGA 1992 relief is available when mixed memberships incorporate in the circumstances described.  

The full correspondence can be found here.

Technical Team 

 

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