TCGA s 162 – mixed partnerships and CGT incorporation relief

TCGA s 162 – mixed partnerships and CGT incorporation relief

Wed 18 May 2016

Following extensive correspondence with the CIOT, HMRC has indicated a change of view in its approach to the availability of TCGA 1992 section 162 relief where a ‘mixed partnership’ (LLP) ie one including both individuals and a corporate member incorporates the partnership business into the existing corporate member.

FA 2014 s 74 and Sch. 17 introduced changes to the taxation of salaried members of mixed partnerships which prompted a significant number of mixed partnerships to incorporate into the corporate member so as to avoid the potential tax charges the new legislation would impose on the individual members.

HMRC confirmed that, subject to all the other conditions being satisfied, they would accept that TCGA 1992 section 162 can apply to the individual members where an LLP transfers its business to the corporate member in exchange for shares in the corporate member.

They have now changed their view. HMRC’s revised view is that section 162 cannot apply because the whole of the assets of the business have not been transferred (as the legislation requires): the partnership is transparent for CGT, (s 59(1) TCGA 1992 and the company is unable to transfer those assets it is already deemed to own to itself.

HMRC’s revised view applies to incorporations from 30 April 2016

HMRC have confirmed that as the revised interpretation of the availability of section 162 relief and mixed partnerships will apply to incorporations from 30 April 2016 no grandfathering provisions for earlier incorporations are considered necessary.

The CIOT has written to HMRC to request that consideration should be given to a specific statutory relief so that section 162 TCGA 1992 relief is available when mixed memberships incorporate in the circumstances described.

The full correspondence is on the CIOT website at


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