By Debbie Franklin, Director of Tax and property tax specialist
Yesterday, 4 October 2023, HMRC made its view on hybrid partnerships very clear.
Sometimes called hybrid business models, they are claimed by the promoters of such arrangements to enable individual landlords to avoid paying tax on their property income and reduce Capital Gains Tax and Inheritance Tax.
HMRC has asserted that these schemes do not work, and landlords may end up paying more tax than they would have needed to, in addition to interest, penalties and the high cost of using such arrangements.
It has always been our opinion that such schemes are caught by legislation in a number of ways that would result in them being deemed unacceptable by HMRC .
Any individual landlords currently using this or a similar scheme may be wise to consider contacting HMRC to rectify the situation rather than being prompted, as penalties may be more favourable.
If you need help or wish us to review your situation, please do contact us.
More information can be found here Property business arrangements involving hybrid partnerships (Spotlight 63) - GOV.UK (www.gov.uk)