Taxation of Chargeable Gains Act 1992 section 59AA

Limited liability partnerships: deemed disposal

Section 59AA creates a deemed disposal for capital gains tax purposes when an asset originally contributed to a limited liability partnership is returned to the contributing member (or a connected person) after the LLP has entered liquidation, ensuring that any gain accruing before the contribution is brought into charge.

• When an LLP that has ceased to be treated as transparent for capital gains purposes disposes of a previously contributed asset back to the contributing member or a connected person, the member is deemed to have disposed of and reacquired the asset at market value immediately before contributing it to the LLP.
• Although the deemed disposal is set at the point just before the original contribution, any resulting chargeable gain or allowable loss only crystallises at the time the LLP actually disposes of the asset back to the member or connected person during liquidation.
• Where the contributed asset is UK land requiring a disposal return under Schedule 2 to the Finance Act 2019, the deemed disposal is treated as completed at the time of the LLP's disposal, so that reporting obligations align with the actual return of the asset.
• To prevent double taxation, any chargeable gain arising on the deemed disposal is reduced by a just and reasonable amount to reflect any gains the member has already been taxed on in relation to the same asset, for example on an earlier part disposal.