CGT – transfer of partnership to an LLP

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Limited Liability Partnerships (LLPs) retain the flexibility of a partnership with the added advantage that a partners personal liability is limited. At least two members must be ‘designated members’ and the law places extra responsibilities on them.


For Capital Gains Tax purposes, the transfer of a business from a partnership to a LLP will not constitute a disposal by the partners of their interests in the original partnership’s assets unless their fractional interests in partnership assets are changed as a result of the transfer.


In addition, the transfer to an LLP of a partner’s rights to an annuity and/or the transfer of obligations to former partners in respect of annuities will, not be regarded as a chargeable disposal by the original partnership provided that the rights remain substantially the same.


The formation of an LLP is generally more complex and costly than that of a conventional partnership. Problems can still arise when there are disagreements between the members. There is also the prospect of paying more tax on high profits than for companies.

Useful information for CGT – transfer of partnership to an LLP