David Brogelli, Author at Elysium Law

Buying a Business in the UK: A Practical Guide to M&A Under £5million

Posted on 26 Jan 202628 Jan 2026 by David Brogelli

Buying a business can be one of the quickest ways to grow, whether you’re acquiring a competitor, expanding into a new market, or buying your first “ready-made” business rather than starting from scratch.

But even when the purchase price is ‘only’ a few hundred thousand pounds (or a few million), the legal and tax issues can be significant. The reality is that smaller acquisitions often carry more hidden risk, because the target business may be owner-managed, less formally documented, and reliant on a few key customers or suppliers.

This guide is written for business owners, would-be business owners and SME directors considering an acquisition under around £5m, where you want a professional, robust legal process, but you also need cost control and fee transparency.

At Elysium Law, we are a barrister-led boutique firm with a tech-enabled, pragmatic approach, designed to deliver cost effective advice with transparent and flexible fees.

The most common deal structure for SMEs: the share purchase

Most of the acquisitions we advise on in the SME space are share purchases.

In a share purchase, you buy the shares in the company that owns and runs the business. The company stays the same legal entity, which means:

the contracts often stay in place;
employees remain employed by the same company; and
the company’s assets and liabilities remain inside the company (and therefore become your responsibility as the new owner).

That last point is crucial: you’re not just buying the ‘good bits’. You are buying the company ‘warts and all’ unless you negotiate contractual protections.

That’s why the quality of the legal work in a share purchase is usually less about paperwork and more about:

identifying risk early (due diligence);
documenting what the seller is promising (warranties);
and allocating risk fairly (indemnities, price mechanisms, disclosure).

A simple overview of the acquisition process (under £5m)

Every transaction has its own shape, but most SME share purchases follow a familiar route.

1) Initial offer and heads of terms

Once price and key commercial points are broadly agreed, the parties often record the deal in Heads of Terms (also called Heads of Agreement or a Term Sheet).

Heads of Terms are usually ‘subject to contract’ (not legally binding on the main deal), but they are still important because they:

set expectations;
drive the timeline; and
prevent expensive misunderstandings later.

Cost-saving tip: A well-drafted Heads of Terms is one of the cheapest ways to avoid a costly negotiation spiral later on.

2) Confidentiality and exclusivity

Before sensitive documents are shared, you’ll usually sign an NDA (non-disclosure agreement).

Sellers often ask for exclusivity, i.e. you spend money on due diligence and lawyers while they agree not to negotiate with anyone else for a short period.

Important consideration: Exclusivity can be reasonable, but it should be:

time-limited;
tied to progress milestones; and
clear about what happens if the seller delays.

3) Due diligence (legal, financial and tax)

Due diligence is the investigation stage. In a share purchase, this is where you look for anything that could make the business worth less than you think, or that might create expensive problems after completion.

Typically:

your accountant covers financial due diligence;
tax specialists cover tax due diligence; and
we handle legal due diligence and coordinate the overall legal workstream.

We also work closely with highly experienced accountants and tax advisers to ensure the deal is structured sensibly from the outset (rather than trying to fix tax issues once the documents are drafted).

4) Drafting and negotiating the SPA (Share Purchase Agreement)

The Share Purchase Agreement (SPA) is the main contract. It sets out:

what’s being bought and sold;
the purchase price and how/when it’s paid;
conditions to completion;
warranties, indemnities and limitations; and
what happens if something goes wrong.

5) Completion and post-completion

On completion day:

money and shares change hands,
director/shareholder changes are implemented, and
filings are made (e.g., Companies House).

Post-completion tasks can be deceptively important – particularly if you’re changing banking arrangements, supplier accounts, insurances or key contracts.

What legal due diligence actually looks at (in plain English)

For acquisitions under £5m, legal due diligence is not about producing a glossy report that gathers dust.

It’s about asking what could hurt you after completion, and how do we either:

fix it before you buy; or
price it into the deal; or
protect you contractually.

Here are the areas we commonly focus on:

Key contracts: Are major customers/suppliers tied in? Are there change-of-control clauses that allow termination if you buy the company?
Employment: Are there key staff, restrictive covenants, grievances, or unpaid holiday liabilities?
Property: Is the premises owned or leased? Are there landlord consents needed for a change of control?
IP and brand: Does the company actually own its website, domain, software, trademarks, designs and content?
Data protection: Are there obvious compliance gaps (particularly with customer data and marketing lists)?
Disputes: Ongoing claims, threats, historic settlement agreements, regulatory complaints.
Corporate housekeeping: Are Companies House filings up to date? Are there missing board minutes, share issues, or unclear ownership?
Insurance: Are policies adequate and transferable?
Tax flags: Share purchases often involve hidden tax risk, which is why coordinated tax input matters early.

Cost-saving tip: A clean, organised data room from the seller can materially reduce fees. Conversely, poorly organised information almost always means more time (and therefore more cost).

Warranties, disclosures and indemnities: the ‘protection layer’ in a share purchase

In a share purchase, you can’t physically separate liabilities from the company, so the SPA usually becomes your protection tool.

Warranties

Warranties are contractual promises from the seller about the company (e.g. contracts, litigation, tax compliance).

If a warranty turns out to be untrue, you may have a claim, but only if:

it’s drafted properly;
it’s not ‘disclosed against’; and
the contract doesn’t limit your remedies too heavily.

Disclosures

Sellers disclose known issues (e.g. “there is a dispute with Customer X”). A properly managed disclosure process is a core part of risk allocation.

Indemnities

Indemnities are usually used for known, specific risks (e.g. a tax investigation, a threatened claim, or a contaminated lease issue). They can offer more direct protection than warranties.

Timelines: how long does an SME acquisition take?

As a broad rule of thumb, many share purchases under £5m complete within 4–12 weeks once heads of terms are agreed – but it can be faster or slower depending on:

the seller’s readiness and document organisation;
whether there is property involved;
how quickly due diligence questions are answered;
the complexity of the SPA negotiations; and
funding arrangements and lender requirements.

If speed matters, we can structure the deal plan around priorities and milestones, so you’re not paying for unnecessary drafting before the main risks are understood.

The cost question: how much should legal support cost for a share purchase under £5m?

Cost is a completely reasonable concern and, for many buyers, the legal spend is one of the few controllable variables in the transaction.

Our approach: fixed fees, scoped to your deal

We offer fixed fees, calculated based on the size and complexity of the transaction, and agreed in advance.

Fixed fees start from £7,500 + VAT for a very simple share purchase.
Regulated businesses (and deals with heavy property/employment complexity) generally require more work and therefore higher fees.

We are able to remain competitive because our model is built around:

efficient, tech-enabled working practices;
a scalable team approach; and
transparent, flexible fees.

What drives cost up (so you can plan for it)

The biggest cost drivers on SME acquisitions are typically:

multiple shareholders/sellers (more negotiation, more signing logistics);
incomplete company records;
property (leases, consents, title issues);
complex customer contracts or change-of-control issues;
deferred consideration/earn-outs/vendor finance; and
regulated sectors (where approvals or compliance steps can be significant).

A quick real-world example

We regularly advise SMEs and owner-managed businesses on acquisitions.

A typical example is acting for a recruitment business carrying out a series of acquisitions of rivals to expand its market reach. In those cases, the legal work needs to be:

repeatable (so every acquisition doesn’t reinvent the wheel);
risk-focused (so the buyer doesn’t accumulate hidden liabilities); and
cost-controlled (so legal fees don’t erode deal value).

That’s exactly the kind of pragmatic, commercially-minded approach we aim to bring.

Why instruct Elysium Law for an SME acquisition?

For many acquisitions under £5m, you don’t need a large City team with a long list of chargeable timekeepers.

What you need is:

an adviser who understands deal mechanics;
who can run a disciplined process;
who knows where SME deals usually go wrong; and
who keeps fees proportionate to the value of the transaction.

Elysium Law was built to provide high quality, cost effective and strategic advice, with a model designed to cut unnecessary friction and expense.

Clients frequently highlight clear explanation and cost transparency in their feedback to us.

Next step: a free, no-obligation call

If you’re considering buying a UK business – whether you’re a first-time buyer or building a buy-and-build strategy, we’re happy to have a free, no-obligation call to discuss the deal, likely risks, and how we would price the work.

You can contact us on 0151 328 1968 or email clerks@elysium-law.com.

The End of the Non-Dom Regime and the New Residence-Based System

Posted on 20 Jun 202514 Jan 2026 by David Brogelli

In the Spring Budget 2024, the UK government announced a seismic shift in the way it will tax foreign income and gains (FIG) of individuals who are UK tax resident. The long-standing “non-dom” regime has been abolished and replaced by a new system based purely on tax residence. These changes took effect from 6 April 2025.

This article explains the key changes and transitional measures and highlights planning considerations for those who are affected.

The End of Non-Dom Taxation

From 6 April 2025, the concept of domicile ceased to play a role in determining liability to UK tax on foreign income and gains. The remittance basis was abolished. Instead, the UK has adopted a residence-based approach more aligned with international standards.
Under the new rules:

All UK tax residents are subject to UK tax on their worldwide income and gains unless they qualify for a new FIG regime, and
All non-UK assets of individuals who have been UK tax resident for at least 10 out of the previous 12 tax years fall within the scope of UK Inheritance Tax (IHT).

This means that long-term UK residents face tax on foreign income and gains as they arise, and their global assets are liable to UK IHT.

The Four-Year FIG Exemption Regime

To provide a degree of transitional relief, the government has introduced a new FIG regime. This is available to individuals who become UK tax resident after a period of at least 10 consecutive years of non-residence.

Qualifying individuals benefit from:

Exemption from UK tax on foreign income and gains for their first four tax years of UK residence (starting from the year of arrival), and
Freedom to remit foreign income and gains to the UK without any UK tax consequences during this period.

This regime is not automatic — individuals must make an election to use it. Those who qualify will not be able to claim double tax relief on foreign income or gains under this regime, but they can choose to opt out.

It’s worth noting that individuals who arrived before 6 April 2025 may qualify for the FIG regime if they meet the 10-year non-residence condition.

Transitional Provisions

To ease the transition from the remittance basis to the new system, the government has introduced several transitional rules for the 2025/26 and 2026/27 tax years.

1. Temporary Repatriation Facility (TRF)

Taxpayers are permitted to remit pre-6 April 2025 foreign income and gains (FIG) to the UK at a flat rate of 12%. This is a time-limited opportunity and is available only during 2025/26 and 2026/27. The TRF applies only to historic FIG and is subject to election and further conditions, including record-keeping obligations.

2. Temporary Reduction in FIG Tax Rate

For the 2025/26 tax year only, individuals who were formerly taxed on the remittance basis (but no longer qualify for the FIG exemption) pay UK tax on their foreign income and gains at 50% of the usual rates. This temporary concession is designed to ease taxpayers into the new regime.

3. Asset Rebasing for Capital Gains Tax

Individuals who have previously used the remittance basis and are not eligible for the FIG exemption are able to elect to rebase their foreign assets to their value as at 5 April 2025. This election applies only to foreign assets held at that date, and gains realised after this date will be subject to UK CGT in the normal way.

This is not a full exemption — it simply means that the UK disregards gains accrued up to 5 April 2025. The rebasing must be claimed and is subject to specific conditions.

Inheritance Tax Reforms

Alongside income and gains reforms, the UK has moved to a residence-based IHT system from 6 April 2025.

Under this regime:

UK residents are subject to IHT on their worldwide estate once they have been resident for at least 10 out of the previous 12 tax years, and
Once an individual has left the UK, they continue to be within the scope of UK IHT on worldwide assets for a 10-year period after ceasing UK residence — commonly known as the “IHT tail” or “exit charge”.

The changes affect both lifetime transfers and death estates. This change aligns IHT treatment with the new income and gains regime and removes the relevance of common law domicile tests.

Non-Resident Trusts

Another significant change affects non-UK trusts established by individuals who previously claimed the remittance basis.

From 6 April 2025:

The protections previously afforded to settlor-interested non-resident trusts are removed, unless the settlor qualifies for and elects into the FIG regime.
For settlors who do not qualify (or do not elect), all trust income and gains become immediately chargeable on the settlor if they are UK resident.
Existing trust structures are not “grandfathered” — protections will only continue if the settlor is within the four-year FIG window.

This has significant implications for clients with offshore trust arrangements, as it may trigger UK tax charges on previously protected trust income and gains.

Planning Considerations

The abolition of the non-dom regime represents the most significant overhaul of UK personal taxation in a generation. Individuals who previously relied on the remittance basis or offshore trust protections will need to urgently review their structures and plans.

Key points to consider:

Eligibility for the FIG exemption – does the client meet the 10-year non-residence condition?
Timing of asset disposals – will rebasing relieve latent gains?
Use of the TRF – is it worth remitting income or gains now at a 12% flat rate?
Estate planning – does the client face exposure to IHT post-2025 or during the 10-year “tail” period?
Offshore trusts – will protections still apply, and if not, what are the tax and reporting consequences?

HMRC is expected to publish further guidance. Whether you are a private client, a business owner, or a professional adviser, you should review your position, understand your exposure, and take advice on restructuring where appropriate.

If you would like to discuss any of the above in more detail, or need help navigating the new system, please don’t hesitate to get in touch.

CGT Rebasing – Why Less Tax For Landlord’s Planning Doesn’t Work

Posted on 06 Feb 202414 Jan 2026 by David Brogelli

Elysium Law has posted several articles on this issue in recent weeks. Since HMRC’s Spotlight 63, we have been continuously approached by landlords who have entered into the planning with LT4L, Chris Bailey or the Bailey Group and they are concerned as to what the best course of action to take is.

At this point, it is probably wise to step back and look at the planning itself and why HMRC says it doesn’t work.

We will break down the key aspects of the planning and the claimed advantages of using it as well as providing HMRC’s view and our opinion of that.

The Structure

By now, especially as you may have used the planning, you will likely be familiar with the structure of the planning. Simply put:

The Landlord (and/or family members) set up a Limited Company and an LLP with the Limited Company as a Corporate member of the LLP.
The Landlord transfers their properties into the LLP and then the Landlord as an individual member of the LLP allocates profits to themselves remaining basic rate taxpayers, excess profits are then allocated to the Limited Company.
The Corporate Member then claims a deduction for finance costs.

The Claimed CGT Advantages

LT4L and Chris Bailey claim that the planning results in a Base Cost Uplift to for Capital Gains Purposes to the date of transfer to the LLP

This means that when you come to sell the property, the Capital Gain is calculated on the value when the property was transferred into the LLP, which ordinarily will be higher than when you originally purchased it. The claim is therefore that this will result in a lower gain and consequently lower CGT being paid.

Our view is that LT4L’s planning is based on a total misconception that Incorporation Relief applies in this instance.

Our Analysis

If on the transfer into the LLP an element of Capital is transferred to the Company, then this element would be rebased for the Company, but that would also trigger an immediate CGT charge to the Client. Any disposal of a property from the LLP is treated as transparent and therefore the Client’s base cost is used to calculate CGT. HMRC explains this in example 2 here, which is taken from their Capital Gains Manual.

It is claimed by the scheme promotors that the Incorporation Relief rules apply here. To clarify HMRC states regarding Incorporation Relief:

“you may be able to delay paying Capital Gains Tax if you transfer your business to a company in return for shares”
HMRC

The fundamental flaw here is that you are not transferring your business to a COMPANY in exchange for SHARES, you are transferring it to an LLP – under a Trust arrangement, an entity which does not have shares.

The following questions regarding CGT rebasing were put to Chris Bailey by a trusted colleague of ours.

Trusted Advisor: “You advised that on the transfer into the LLP the properties would be rebased for CGT purposes. I questioned this and although I appreciate that they would be recorded in the LLP accounts at fair market value, on a disposal of a property the LLP would be treated as transparent and as such CLIENT’s base cost would be used for the purposes of the CGT calculation. You advised that this wouldn’t be the case and that he would only be subject to CGT on any growth from the date of contribution into the LLP. I can see that on the transfer into the LLP if an element of capital is transferred to the Company then this would rebase that element for the benefit of the company, but it would also trigger CGT on CLIENT’s disposal to the company. So, on the basis that no CGT is triggered on the transfer into the LLP, I assume that all capital is retained by CLIENT. This is demonstrated in HMRC example 2 on the attached: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg27940 where it demonstrates that the base cost for the disposal is the original base cost (not the uplifted market value).” (Trusted Advisor)

Chris Bailey: “An LLP is an incorporated partnership and as such the incorporation relief rules can be applied”.

Trusted Advisor: “How can incorporation relief apply to an LLP? Incorporation relief requires a person to transfer a business to a company in exchange for shares. The LLP is a corporate body, but it is not a company and cannot issue shares so I can’t see how this could apply or the impact it would have on CLIENT’ CGT base cost. Please can you clarify?”

Chris Bailey: “The LLP’s capital account is increased by the level of the equity. The same rules apply as in a company environment, in that if the LLP is closed down then the CGT would become payable – just as in a company environment.”

As you can see, the question remains unanswered.

Elysium Law has spoken to multiple individuals who used this planning and subsequently received a revised and unexpected CGT calculation from HMRC on the basis of the original value of the properties, not their rebased value as claimed by Chris Bailey.

This of course has resulted in a very large tax charge and had the individuals been aware, it would certainly have affected their decision to sell the properties.

Conclusion

Despite LT4L and Chris Bailey’s claims that there is a CGT Base Cost Uplift, Elysium Law has now been approached by numerous clients who have now had to pay CGT from the date of purchase of the assets, not the uplifted value.

We have seen no advice from Chris Bailey or LT4L as to what they should do, and our view is that they have a claim in professional negligence. Elysium Law has an outstanding track record of bringing, defending, and settling high-value and complex cases.

Artificial Intelligence in the Legal Industry

Posted on 19 Jan 202304 Apr 2024 by David Brogelli

In this article, David Brogelli of Elysium Law examines the increasing use of Artificial Intelligence in the Legal Industry and its practical applications going forward.

Artificial intelligence (AI) has been increasingly used in the field of law both in the United Kingdom and across the globe. There are a number of ways in which AI is being used to improve the legal process, including legal research, document review, and case prediction.

Uses

One of the main ways in which AI is being used in UK law is in the area of legal research. AI-powered legal research tools can quickly and accurately search through vast amounts of information, such as case law and statutes, making it easier for lawyers to find relevant information and make decisions. This can save time and money for both lawyers and more importantly their clients.

Another key area where AI is being used is in document review. This process is typically time-consuming and laborious, as it involves reading through large amounts of text to identify relevant information. AI-powered document review tools can help to automate this process, making it more efficient and accurate. This can be particularly useful in the context of e-discovery, where large volumes of electronic documents need to be reviewed in the context of litigation. Elysium Law uses powerful software which can help us sift through hundreds of thousands of pages to get the information we require.

Interestingly AI is also being used to predict the outcome of cases. By analysing patterns in past cases, AI algorithms can be trained to predict the likelihood of a particular outcome in a future case. This can be useful for lawyers and clients in planning their strategy and making decisions, although practically this is still in its infancy.

In addition, AI is being used to automate the contract review process, helping lawyers to identify errors, inconsistencies and identify missing information. This is particularly useful in the area of due diligence, where large numbers of contracts need to be reviewed.

However, it’s worth noting that AI isn’t without its limitations and challenges, such as bias and lack of transparency, etc. In order to ensure that AI is used in a responsible and ethical way, it’s important to have proper governance and regulations in place.

Risks

Of course, with any new development comes risk below are some of the limitations and concerns regarding the use of AI in the legal industry.

Bias: AI systems may perpetuate and even amplify existing biases in the data they are trained on. This can lead to unfair or inaccurate decisions and is of course a very important consideration as the use of AI evolves. It also highlights the importance of human involvement.
Lack of accountability: It can be difficult to determine who is responsible for errors made by AI systems, which can make it challenging to hold anyone accountable for those errors.
Loss of jobs: The use of Artificial Intelligence in the legal industry may lead to job loss for lawyers and other legal professionals, as tasks that were previously done by humans may be automated. This is of course a global issue that will need addressing over the coming years as automation continues to increase and society develops.
Complexity: The legal field is complex and nuanced, which can make it challenging for AI systems to accurately understand and interpret legal information.
Lack of transparency: Some AI systems may be difficult to understand or explain, which can make it challenging for humans to understand how they are making decisions.

Regulation

Overall, AI has the potential to significantly improve the legal industry both in the UK and globally, making it more efficient, accurate and cost-effective. As technology continues to develop, it’s likely that we will see more and more applications of AI in the legal field and we are certainly seeing significant investment from the UK Legal Industry. This of course will require regulation and the EU is leading in that regard. The European Commission already has a regulatory framework proposal that identifies the risks and uses of AI in the legal sector.

At Elysium Law we use several sophisticated programs to help us deal with clients’ matters efficiently and to save costs to the client. We continue to watch this development with interest.

STANDSTILL AGREEMENTS AND HMRC

Posted on 11 Jan 202304 Apr 2024 by David Brogelli

In this article David Brogelli discusses the use of a Standstill Agreement specifically in disputes with HMRC but also their relevance in wider applications.

Limitation

The Limitation Act 1980 sets out specific time limits for certain actions to be brought.

A Claimant’s failure to do so is an absolute bar to bringing the Claim, but the defence of limitation must be pleaded in any Defence.

Note, the court will not simply strike out a claim of its own motion.

Recently, Elysium Law has been approached by a number of clients who, either as individuals or via their Company entered Tax Avoidance Schemes all of which were registered under DoTAS.

Not surprisingly, HMRC has issued determinations under Regulation 80 of the Income Tax Pay As You Earn and Regulation 2003 and Section 8 of the Social Security (Transfer of Contributions) regulations 2001.

Again, not surprisingly, given the planning arrangements and various challenges most of these assessments have been the subject of an appeal with the tax held over pending the outcome.

As far as the collection of National Insurance Contributions are concerned, this is a contractual debt. HMRC is therefore bound by the provisions of Section 5 of the act in that any claims for a debt must be issued within the 6-years period, failing which the Taxpayer can raise limitation as an absolute bar to the claim.

For the avoidance of doubt, the NIC is due from the year in which it should have been paid and not of course from the date of the assessment.

The Letter of Claim and the Pre-Action Protocol for debt Claims

HMRC is not bound by the pre-action protocol on debts.

Their position is covered by Practice Direction 7 D Section 1.1 (e).

Generally, if a defence is filed, the court will fix a date for a hearing and the only evidence that is needed from HMRC is a certificate – the PD goes on to state;

3.1 On the hearing date the court may dispose of the claim.

(Section 25A(1) and (2) of the Commissioners for Revenue and Customs Act 2005 (‘the 2005 Act’) provides that a certificate of an officer of Revenue and Customs that, to the best of that officer’s knowledge and belief, a sum payable to the Commissioners under or by virtue of an enactment or by virtue of a contract settlement (within the meaning of section25(6) of the 2005 Act) has not been paid, is sufficient evidence that the sum mentioned in the certificate is unpaid.)

The ’PD’ goes on to state:

3.2 But exceptionally, if the court does not dispose of the claim on the hearing date it may give case management directions, which may if the defendant has filed a defence, include allocating the case.

Protective proceedings and the issue of a Claim

In their Particulars of Claim HMRC say:

“The Claim is issued to protect the Claimant’s right to NICs that it considers to be correctly due…once the Claim is issued, it is the Claimants intention to make application to the court for a general adjournment pending the outcome of the Defendant’s appeal.”

As far as the issue fee is concerned, most if not all of these cases fall into the County Court and the issue fee is payable in the sum of 5% of the amount alleged to be owed. In the event that the Claimant loses the claim, the disbursement as well as any cost will automatically follow the event as will interest on the debt, which must be pleaded in the Claim.

In the majority of cases, HMRC has written to the various Defendants and has threatened proceedings.

Prior to issuing proceedings, it is prudent that HMRC is offered a standstill agreement in order to stop time running during the limitation period. We believe that this will protect the Taxpayer on the question of costs should the challenge to the planning fail and the NICs become due and payable, as at that stage, there can be no defence to the Claim.

Standstill Agreements

In our view and in order to protect your client or yourself on costs, we suggest that you offer HMRC a standstill agreement under which the Claimant agrees not to rely on the expiry of a limitation period as a defence and which runs from a given date (usually the date of the agreement) until notice is given to restart the claim.

This will, in effect, freeze the running of time at the date of the agreement, while giving the Defendant the option to start the clock running again by giving notice to the claimant. Of course, if the Defendant taxpayer wanted to restart the claim before the planning issues had been decided by for example the FTT, then HMRC would be within its rights to issue and stay the claim. This would result in no costs protection for the Defendant, on the contrary.

How is time stood still?

There is a difference between extending time and suspending time for limitation purposes.

An agreement to suspend time (Standstill Agreement) is set out in the following way.

The suspension of time under this agreement shall continue in force until the earlier of:

(a) 30 days after the service by any party of a notice stating that the running of time is to recommence; or

(b) the service of proceedings by any party in connection with the Dispute; or

(c) [add in a long stop date] or an event such as determination of the issues taken by HMRC (mention the planning).

In this case, upon the conclusion of the trigger event, the remainder of the limitation period would run.

If however, the Parties decide to contract to extend the limitation this will expire on the date set out in the agreement.

The author’s view is that the suspension of time is by far the safest way of proceeding.

If you want to know more about standstill agreements or want advice upon litigation against HMRC, or any other party, then contact us www.elysium-law.com

Incorporation of a Property Portfolio

Posted on 28 Oct 202212 Jan 2026 by David Brogelli

In this article Richard Gray, Barrister of Elysium Law considers the tax reliefs available as well as the evidential and anti-avoidance issues to be considered when incorporating a property portfolio into a Company. The article takes not only a brief look at case law but considers the advisors retainer and the practical steps to be taken with the client when undertaking such work.

Much has been written about the incorporation of a property portfolio from a partnership into a limited company.

It is important to remember that the whole transaction consists of two elements

(i) Incorporation of a business; and

(ii) Transfer of the partnership

Clients (and sometimes their advisors) confuse the two, but each is a separate and distinct consideration.

To a considerable extent, each is fact specific and based upon evidence, which the advisor and their clients should be able to refer to should the claim for Roll-over Relief be challenged by HMRC and/or the issue of the existence of a partnership, is also called into question.

The Legislation -Rollover Relief Taxation to Chargeable Gains Act 1992

162 Roll-over relief on transfer of business

(1) This section shall apply for the purposes of this Act where a person who is not a company transfers to a company a business as a going concern, together with the whole assets of the business, or together with the whole of those assets other than cash, and the business is so transferred wholly or partly in exchange for shares issued by the company to the person transferring the business.

The legislation does not define the term ‘business’ and largely as one may know, the matter is dealt with in case law and by the evidence produced by the taxpayer as to the carrying on of a business should there be a challenge for the relief claimed. The classic case is that of Elisabeth Moyne Ramsay v HMRC [1] (but again, there is no defining one size fits all factual scenario) and the issue is therefore fact specific to each case. Records of any business activity should be capable of being produced if required and by all persons within the business.

Further examples can be found in case law but be advised, that HMRC will not give non-statutory clearance on this point. It is down to the taxpayer and perhaps the advisor to formulate the case and be able to meet any anticipated challenge from HMRC.

Invariably, the accountant/advisor will know the client, but it is important that in drafting the retainer letter, the advisor should attribute the ultimate responsibility to the client, if possible, as to the facts of how the enterprise was run, which should be recorded in a comprehensive file note and sent by detailed letter to the client for confirmation and signature.

Be aware however, that in drafting the retainer, the incorporation will have been brought about possibly upon the accountant’s advice and unless seeking independent advice such as from Counsel, the accountant/advisor should really acquaint themselves with the facts and give the client a full explanation of the cases on the point if necessary. Please also be aware that the client will invariably be a consumer and any attempt to limit or exclude liability must be considered in the light of Part 2 of the Consumer Rights Act 2015. In a case where there is a large claim for such relief, it may be advisable to seek advice from Counsel and instruct Counsel to draft the appropriate retainer letter.

Debt/Equity – Point to remember

Rollover relief can be claimed only where the equity in the properties is more than the Capital Gain. It is important that clients understand the debt/equity position. Whilst acting for them during their business they should have made full disclosure as to any re-mortgaging of the properties and what they have done with the money acquired. If that money has been removed from the portfolio and spent on anything outside of it, then the incorporation may not be possible unless the debt is repaid prior to incorporation or regardless of withdrawal, there is still enough equity in the properties. Again, use a simple analogy such as re-mortgaging for a new private residence. In a removal situation the gain will be more than the equity in all probability, but the client should set the facts down and then undertake the calculation. Remember, that the information given relies upon the accuracy of the client. Therefore, the retainer letter should exclude any liability for the information given. An example of the calculation is given in HMRC manual CG65740.

Partnerships and SDLT relief

Partnership as transferor

Given that the consideration is for shares then the payment of SDLT will be calculated on the value of the shares.

Section 53 of the Finance Act 2003 and the Market Value Rule

53 Deemed market value where transaction involves connected company

(1) This section applies where the purchaser is a company and—

(a) the vendor is connected with the purchaser, or

(b) some or all of the consideration for the transaction consists of the issue or transfer of shares in a company with which the vendor is connected.

(1A) The chargeable consideration for the transaction shall be taken to be not less than—

(a) the market value of the subject-matter of the transaction as at the effective date of the transaction.

(4) Where this section applies paragraph 1 of Schedule 3 (exemption of transactions for which there is no chargeable consideration) does not apply.

But this section has effect subject to any other provision affording exemption or relief from stamp duty land tax.

Where there is a transfer at Market Value to a connected Company an SDLT charge will therefore arise.

Generally

FA2003, Schedule 15, para 18 onwards applies to the transfer of a chargeable interest from either a Partnership or an LLP^{^[2]} and will apply upon an incorporation where the existing business is operated through a Partnership or LLP.

The calculation at para 20 (“Transfer Of Chargeable Interest from a Partnership: Sum of The Lower Proportions”) provides that the chargeable consideration will be equal to the % of the income rights changing hands applied to the market value of the property.

The shares should be issued in proportion to the partnership income.

SDLT relief will not be available if shares are issued disproportionately to the capital in the partnership.

It appears that HMRC accept that FA2003, Schedule 15 takes effect in priority to the market value rule in s53 of the Finance Act 2003. This means that no SDLT would be chargeable if the transfer came from a partnership or limited partnership providing that the steps in paragraphs 18-22 of Schedule 15, are followed. Again, the existence of a partnership is a matter for the individual client, and one cannot simply undertake a ‘one size fits all’ approach.

Of note is paragraph 17A of Schedule 15. Essentially, if value is removed from the partnership within 3 years of land being transferred to it, where there was no SDLT or reduced SDLT by a partner or connected person^{^[3]} then paragraph 17A operates to produce a charge. However, incorporation does not remove the property and Schedule 17 will not apply.

Two points of importance also must be recognised:

This rule appears to be an anomaly in the legislation in that partners are favoured in this way. In that respect a partnership deed should be in existence, or the accounts treated as partnership accounts. One cannot retrospectively draw up partnership accounts if they have not been operated in this way previously.

Partnership and Co-ownership are NOT the same. There must be evidence of one partner being able to bind another and a separate bank account being operated. All must agree to share profits and losses^[4].

There are two cases with which the advisor should be familiar.

As to the existence of a business and a partnership one needs to refer to the case of SC Properties and Another v Commissioners for HM Revenue & Customs.

For the purpose of this article, we propose to concentrate upon the partnership issue that arose in the case. The Partnership itself was not registered with HMRC until February 2019, which was long after the property transactions which were the subject of the tax dispute had occurred. Whilst the appellants (but strangely not one of the partners Mrs Cooke who did not give evidence) argued that the partnership occurred in 2014, HMRC rejected this. Whilst Partnership accounts were prepared for 2015-2017, and a Partnership return was filed for 2017 HMRC argued that on the facts there was no business (there being no mention of a partnership) and that neither Section 162 nor Schedule 15 applied.

As far as the existence of a partnership is concerned guidance was had by reference to the case of Burnett v Barker [2021] 3332(Ch)

This case calls very much into question certain assumptions that advisors make when looking at the question of the existence of a partnership. Whilst this case was not on the point of the SDLT relief that is often sought, it nevertheless discloses interesting issues set out in the Partnership Act 1890.

Section 1(1) of the Partnership Act 1890 provides:

Definition of partnership

1. (1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.

From the statutory definition it appears that before a partnership can be said to exist, three conditions must be satisfied, i.e. there must be:

(1) a business;

(2) which is carried on by two or more persons in common;

(3) with “a view of profit”

Section 2 of the Partnership Act 1890 sets out certain rules for determining the existence of a partnership:

Rules for determining existence of partnership

2. In determining whether a partnership does or does not exist regard shall be had to the following rules:

(1) Joint tenancy, tenancy in common, joint property, common property or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

(2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.

(3) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of a business does not of itself make him a partner in the business;

For the sake of completeness, we have set out paragraphs 40-42 of the judgment and advisers should bare this in mind when advising clients.

With one exception (the receipt of a share of profits), the above rules are formulated as negative propositions and merely establish the evidential weight to be attached where the particular facts of a case precisely duplicate those set out in the section. However, it will rarely, if ever, be possible to divorce those facts from the surrounding circumstances so as to permit the statutory rules to be applied in their pure form. Fundamentally, in determining the existence of a partnership, regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case (Lindley & Banks, para 5-03).
There is some further guidance about the evidence required to prove a partnership in Lindley & Banks, Chapter 7 and in particular the types of ‘usual’ evidence relied on in para 7-23 etc including (so far as likely to be relevant here): accounts (draft or final); advertisements; agreements and other documents; bills, circulars and invoices; brochures; conduct; holding out; joint bank accounts; joint property; letters and memoranda; meetings; profit share; tax returns; use of property; wages; and witnesses.
Although conduct is clearly relevant, it will not be determinative, particularly if it can be demonstrated that there was actually no intention to create a partnership. As to witness evidence (which is also relied on) – a witness may be asked whether named individuals compose the firm.

In light of this judgment, it may once again be advisable to go to specialist Counsel for advice especially where the reliefs sought are large, and Counsel can then advise if appropriate upon the collation of evidence. Our suggestion would be to obtain statements of truth from the Clients with exhibits in the form set out as required by the FTT (Elysium law can assist in this respect) and obtain further evidence such as that mentioned above. Above all, read and consider Section 2 (1) and (2) above and once again go through PIM1030 with the clients.

In summary, the reliefs available to people who carry on a property business partnership are significant, but a thorough process must be undertaken with the clients before incorporation takes place.

Points to remember

Is there a business and can this be evidenced by facts if required?
Is there a Partnership? NOTE: Co-Ownership is not the same. Again, can this be evidenced by the partnership accounts, any partnership agreement, any stationery in the name of the partnership used by the partners for correspondence?
If in doubt, get a further opinion from Counsel and ask what evidence is required including statements of truth from the clients.
Go through PIM1030 and the Partnership Act.
Clarify what the debt/equity position is and get this certified by the clients in clear terms.

Anti-Avoidance Rules

Anti-avoidance rules are set out in the Finance Act 2003 Sch 15 para 17A.

Paragraph 17A imposes a charge to SDLT if, during the three years after a para 10 transfer of land to a partnership, the transferor or a partner connected with the transferor:

(i) Withdraws money or money’s worth from the partnership (other than income profit);

(ii) Reduces their interest in the partnership share; or

(iii) Ceases to be a partner. This would include the withdrawal of capital from the capital account and the repayment of a partner’s loan.

Does incorporation constitute a withdrawal for these purposes?

Some ask whether an incorporation is to be treated as a ‘withdrawal’ for the purposes of para 17A

The answer is no. A withdrawal is only a qualifying event if it is coupled with a partner withdrawing capital from his account, reducing his interest in the partnership

Further Anti-Avoidance provisions

Of further interest is Section 75A of the Finance Act 2003

This may be relevant where the following takes place:

Property investor operates as a sole trader or joint owner with A.N. Other;
A Partnership or LLP is formalised; and
Sometime afterwards this Partnership is ‘converted’ to NewCo

Without any of the anti-avoidance provisions, and assuming this was the genuine substance of the transaction, then an SDLT charge could be avoided.

Clearly, the planning could fall within the generality of s75A given that:

The property Investor (V) will dispose of a chargeable interest and NewCo (P) will acquire it;
Subject to the precise definition of ‘transaction’, a transaction [the partnership and the incorporation] is involved in connection with the disposal and acquisition (“the scheme transactions”); and
3. the amounts of stamp duty land tax payable in respect of the scheme transactions would be less than the amount that would be payable on a notional land transaction effecting the acquisition of V’s chargeable interest by P on its disposal by V.

One question, highlighted above, is whether we have a scheme transaction. This is defined at s75A (3) which provides a (non-exhaustive) list of ‘transactions. The incorporation process would not fall within the definitions of a scheme transaction.

A question would therefore be whether, assuming that the Partnership had been in place for a reasonable period, and was being genuinely operated as a partnership, there is a realistic danger that HMRC would invoke 75A?

Whilst I am aware, that HMRC is seeking to apply this section more aggressively than it has historically done so in relation to SDLT planning arrangements, I do not believe that there is a real risk of HMRC making a successful attack. This section needs to be carefully reviewed with the client however before incorporation takes place.

Conclusion

In conclusion property incorporation can be very useful in many circumstances but clearly each and every aspect of it both as to the calculations and principles of the existence of the business and as a separate consideration the partnership must be carefully considered.

If you require further advice on incorporations relief or require assistance, then please call us on 0151 328 1968 or visit our website www.elysium-law.com.

[1] Ramsay v HMRC [2013] UKUT 0236 (UTT).

[2] Partnership includes LLP

[3] See paragraphs 10-12 of Schedule 15

[4] See HMRC guidance at PIM1030 which SHOULD be read and gone through with the client.