Taxation of Chargeable Gains Act 1992 section 169A

Cessation of trade by limited liability partnership

Section 169A deals with what happens to previously deferred capital gains when a limited liability partnership (LLP) ceases to be treated as a transparent partnership for tax purposes.

• When an LLP loses its tax-transparent status (for example, on going into liquidation), any capital gains that members had previously deferred are triggered immediately
• This applies where a member holds an asset (or interest in an asset) that was acquired from the partnership at a reduced consideration under gift relief or hold-over relief provisions
• The member is treated as if a chargeable gain equal to the amount of the original reduction accrued to them immediately before the LLP lost its transparent status
• The purpose of this rule is to prevent deferred gains from escaping the tax charge entirely — which could otherwise happen if, for instance, the asset passed to a liquidator who would not take the earlier relief into account when computing any gain on disposal