M+A Partners HomeBlogHybrid Property Partnership Scheme

On 4 October 2023, HMRC published Tax Avoidance Spotlight 63: ‘Property business arrangements involving hybrid partnerships.’

The spotlight covers a scheme marketed as tax planning, available to individual property landlords to structure their property business, referred to as a hybrid business model.

Our view, and that of HMRC’s, is that this scheme does not work. People who use these arrangements may have to pay more tax than they tried to avoid as well as paying interest, penalties, and high fees.

About the scheme

The scheme seeks to avoid tax by allowing individual or joint property landlords to transfer their properties to a Limited Liability Partnership (LLP) with a corporate member. The LLP then allocates profits to its members on a discretionary basis.

The aims of the scheme include

  1. Avoid the restriction on finance costs such as mortgage interest.
  2. Reduce the tax payable on profits generated by the property business.
  3. Reduce Capital Gains Tax (CGT) when the properties are sold.
  4. Reduce Inheritance Tax (IHT) payable in respect of the properties on death.

HMRC’s view is that the scheme does not work

HMRC’s Spotlight release can be found by clicking here.

Our Opinion

As property tax specialists, we have been regularly approached to provide advice on similar schemes. Our opinion was, and remains, that the scheme is too aggressive, contrived, and artificial. We have refused to participate in selling the arrangements under the guise of legitimate tax planning.

As a member of regulated bodies including the Chartered Institute of Tax (CIOT) and the Institute of Chartered Accountants in England and Wales (ICAEW), M+A Partners owes a duty of care to its clients to provide robust and legitimate tax planning advice, without exposing the taxpayer to undue risk.

Find out more

Download our factsheet below to read more about the scheme and how it is claimed it works.

How M+A Partners can help

If you find that you need to extradite yourself from a hybrid partnership, we urge you to contact us, before HMRC open an enquiry into your tax affairs.

At M+A Partners, you will be advised by qualified professionals including Chartered Tax Advisers (CTA) and members of the Society of Trust and Estate Practitioners (STEP).

For any queries on this matter, please get in touch with me using the contact details below.

Written by

Sam Holloway
Senior Tax Manager
BIO
Sam joined M+A Partners in July 2008 after obtaining a degree in accounting and finance at the University of East Anglia.

Sam has since gone on to qualify as a Chartered Tax Adviser and is now one of our Senior Tax Managers. He is able to give specialist advice in matters concerning corporation tax, income tax, capital gains tax and stamp duty land tax. His current clients include individuals, companies, partnerships and sole traders with a focus on tax planning.

As a landlord, Sam has a keen interest in property related businesses whether held personally, in a partnership or in a corporate structure and advises many of our clients with property income.

Sam takes a straight talking approach to the advice he gives, getting to the point, and he likes to stay in contact with his clients regularly. He says: ‘Emails and letters are a great way to stay in contact, but sometimes it is about picking up the phone and speaking to your clients to get an understanding of how they are getting on, what challenges they are facing and how tax is impacting their business’.
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Hybrid Property Partnership Scheme