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If you are a landlord and someone has told you about a clever Capital Gains Tax (CGT) workaround, read this landlord CGT scheme warning first. HMRC is cracking down on schemes involving Limited Liability Partnerships (LLPs) and companies — and says landlords could face big tax bills.
Here is a simple explanation of what the scheme involves and what you should know before making any decisions.
Understanding the landlord CGT scheme in detail
Some landlords have been told to:
- Move their rental property into a Limited Liability Partnership (LLP)
- Then transfer the LLP into a Limited Company
- Claim that no CGT needs to be paid during this process
This landlord CGT scheme claims to avoid tax — but HMRC says it does not work. Let’s break it down simply.
Step 1: What is an LLP and why HMRC is warning
An LLP (Limited Liability Partnership) is a type of business structure that’s a bit like a company and a partnership combined:
- It is a separate legal entity, which means it can own things in its own name
- It has members, not shareholders
- Each member pays Income Tax on their share of the profits — there is no Corporation Tax
- Members usually agree how to split profits, for example 50/50 or 70/30
In this landlord CGT scheme: You move your property into an LLP that you control. You may also add another member, like your limited company or a family member.
The issue: Even though no cash changes hands, you are still giving the property to a different legal owner. HMRC says this is a taxable event, and CGT is normally due based on the current market value.
Step 2: Moving property into a limited company
A limited company is also a separate legal entity. But unlike an LLP:
- It has shareholders (owners) and directors (people who run it)
- It pays Corporation Tax on profits
- Profits are paid to shareholders through dividends, usually based on how many shares they hold
In this scheme: The LLP (which now owns the property) is moved into a limited company. The idea is to move the property into a company structure without triggering CGT.
The issue: HMRC says this is another change of ownership. Even though you control both the LLP and the company, the law still says the property has changed hands — and CGT should apply again.
❌ HMRC says CGT is still due in these schemes
The scheme claims that, by using this two-step method, the company now owns the property at today’s value — and no CGT needs to be paid.
But HMRC says this does not reflect how tax law works.
HMRC crackdown: landlord CGT scheme warning
- The scheme gives a false picture of how CGT applies — because it skips the tax that should be paid when ownership changes
- It tries to reset the property’s value to today’s price without paying tax on the profit made since the original purchase
- It ignores the rule that says transactions between you and your own company must use full market value
Read HMRC’s official warning here
⚖️ Tribunal ruling and the landlord CGT scheme
A recent tribunal allowed a similar scheme. HMRC lost, and no CGT was due. However, that case was based on specific facts. HMRC is still challenging these schemes and reviewing them case by case.
⚠️ What this means for landlords
If you have used this scheme — or are thinking about it — be aware:
- HMRC may ask you to pay backdated CGT
- They could add interest and penalties
- You may need to unwind the structure, which could be complicated and costly
This is especially important in light of HMRC’s landlord CGT scheme warning, which highlights the risks of unproven tax strategies.
- Private Residence Relief (if you lived in the property)
- Lettings Relief (for former rental homes)
- Annual exemptions and smart timing
- Proper planning when incorporating rental businesses
Read more about Making Tax Digital and tax compliance here
It is safer to get proper advice and use legal, well-known tax reliefs that do not involve unnecessary risk.
We support landlords across Wimbledon, South London and the UK with clear, simple advice — no jargon.
Need support with landlord CGT and property tax?
At Southside Accountants, we help landlords and small business owners in Wimbledon and across the UK with Capital Gains Tax, property structures, and compliance advice. If you would like to discuss how HMRC’s position affects your property portfolio, we offer a free, no-obligation consultation.
We can talk in a way that works best for you — by email, over the phone, on Zoom, or in person.
You can call us directly on 020 8432 2969 or click below to send us a message.
MBA, FCCA, BSc (Hons)
Director, Southside Accountants
Accountants in Wimbledon | Nationwide Support
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