UK Tax Authority Warns of Avoidance Schemes Targeting Landlords

Landlords who seek to reduce their tax bills by transferring properties to limited liability partnerships with corporate members face possible penalties for tax avoidance, the UK tax authority warned Wednesday.

Landlords using such “hybrid” arrangements could end up paying more than they intended to save, once interest, penalties and high fees are applied, according to guidance from His Majesty’s Revenue and Customs.

• Under these promoted schemes, a corporate member of the LLP takes on the landlord’s mortgage liabilities via an indemnity. This is then used to make a capital contribution and claim a deduction for the property’s mortgage interest. ...