Would a partnership with 29 tenancies be able to claim retirement relief?

incorporation is (in my opinion) entirely plausible strategy. Despite the Dan Neidle issue , which caused me to take extra advice from my accountants and another (not P118) specialist tax advisor we are still proceeding to incorporate in 2027 as we need to run a partnership for two years prior to the actual incorporation. I think the issue with Dan Neidle was referring to a bridging loan finance arrangement. Maybe some advice outside of P118 will put incorporation back on the map for you.

I don’t see why you cannot convert the partnership to a limited company. We have done it and it works well, but you do need to take some expert tax advise that covers your specific circumstances.

I think Dan Neidle has issues with doing the conversion in a particular way. We used a decent accountant and corporate lawyer and had a clear plan .

CIOT is seeking clarification from HMRC, which is not forthcoming, concerning all forms of incorporation.

CIOT is also asking for an amnesty for all its members dependent on this clarification. It is not clear-cut for any incorporation at the moment.

Until HMRC or the Courts provide much needed clarification over incorporation reliefs it has become impossible for any adviser to legitimately recommend incorporation of a rental property business with mortgages for the following reasons:-

Simon’s Taxes at B9:114 says …

“The incorporation of a buy-to-let property business may involve refinancing the existing mortgages which could possibly prevent HMRC applying ESC D32. If the company does not assume the same liabilities of the transferor, but instead raises finance of its own, which is passed to the transferor to settle its debts related to the properties being transferred, there is considerable risk that HMRC might choose not to apply its concession.”

The above expert guidance from Simon’s Taxes is clearly derived from HMRC’s explanation of ESC D32 in CG65745, in particular the words “indemnity” and “taken over”.

“The transferor is not required to transfer business liabilities to the company but often does so. This is normally done in practice by the company giving the transferor an indemnity in respect of those liabilities.

Where liabilities are taken over by a company on the transfer of a business to the company, the Revenue are prepared for the purposes of the ‘rollover’ provision in TCGA 1992 s 162, not to treat such liabilities as consideration. If therefore the other conditions of s 162 are satisfied, no capital gain arises on the transfer. Relief under s 162 is not precluded by the fact that some or all of the liabilities of the business are not taken over by the company.”

The simple answer is “probably no”.

Reply to the comment left by Mark Alexander – Founder of Property118 at 02/01/2025 – 09:57
Thanks Mark, quotations from tax manuals mean nothing to (probably most ) of us non experts (I’m a retired gardener by trade not a tax expert now still confused and not knowing who to trust P118 or my accountants and other specialist advisor. All i can read into this is the waters are still muddy regardless of which expert is advising us. would you have any insight on the initial question of retirement relief strategy ? is it a viable option . I,m getting to the opinion that its easier just to suck up the CGT and reduce our portfolio to a mortgage free status and handover to the kids well within the 7 year period.

Reply to the comment left by robert fisher at 02/01/2025 – 10:56
For the reasons already given, property investment businesses are NOT eligible for , “Retirement Relief” (AKA Business Asset Disposal Relief or BADR).

Reply to the comment left by Mark Alexander – Founder of Property118 at 02/01/2025 – 09:57
Is there anyway around the stamp duty issue. My understanding is when you incorporate SDLT is due. To recoup this cost it could take years.

Reply to the comment left by Ash at 04/01/2025 – 11:07
Not really. If your business is an established Partnership there may be no SDLT due but forming a Partnership with the intention of mitigating SDLT falls foul of anti-avoidance profer.

If there are genuine commercial reasons for the existence of a Partnership that’s fine, but be prepared to be challenged by HMRC over it and be prepared to run the Partnership for a considerable amount of time to demonstrate substance over form. A minimum of years three years is the guidance most professional advisers recommend.

We are 18 months into the partnership journey with 118. If a BTL is mortgage free, can that be transferred into the Ltd company? Is a directors Loan still created for the full equity value.