When “Martin” (not his real name) came to us, his voice carried the kind of exhaustion we often hear from landlords who have been fighting battles on too many fronts for too long.
For decades, Martin had built what most would call a success story. At its peak, his UK rental property business held over 100 units, carefully acquired over thirty years of graft. Like many landlords, he had been persuaded to move his portfolio into a Hybrid LLP structure when the pitch for tax efficiency seemed irresistible.
But the reality had turned toxic. The structure that was supposed to protect him had become a cage. Penal Stamp Duty Land Tax (SDLT) charges and the inability to claim finance cost relief had eaten away at the business. Every year brought new assessments, more demands, and less flexibility.
By the time Martin approached Property118, the damage was already visible. To keep pace with HMRC liabilities and service costs, he had been forced to sell over thirty properties. His once expansive portfolio was down to sixty-eight. Each sale felt less like a business decision and more like a surrender.
“I spent thirty years building this,” he told us in our first call. “Now I’m selling it off in pieces just to pay tax bills on a structure I wish I’d never touched. I feel like I’m working for everyone but me.”
The problem wasn’t just financial. It was emotional. What had started as a business to create security for his family had become a source of stress and sleepless nights. Every property he sold under pressure felt like losing another brick in the wall of the legacy he wanted to leave behind.
The Breaking Point
By the time Martin sat down to review the numbers with us, the situation was unsustainable.
The forced sales had plugged some of the gaps, but the Hybrid LLP was still producing a stream of tax liabilities that felt impossible to get ahead of. HMRC’s latest assessment had landed, demanding another significant payment. Even with the recent disposals, the portfolio was still carrying the weight of the old structure’s flaws.
“It felt like a treadmill I couldn’t get off,” Martin said. “Every sale was just fuelling the next bill. I couldn’t see an end to it.”
The most alarming realisation was that the Hybrid LLP offered no graceful exit. Unwinding it entirely would trigger more tax, more SDLT, and more legal cost. Selling the entire portfolio in one go would have been a fire sale, wiping out value he had spent three decades building.
That was the moment the conversation shifted.
Instead of trying to salvage the whole structure, Martin decided to save what mattered most. Out of the 68 properties remaining, he identified a core block of 16 that could form the foundation of a fresh start, a clean, commercial structure that would finally free him from the LLP and set up a secure future for himself and his family.
“It wasn’t about saving everything,” he admitted. “It was about stopping the bleeding and building something I could actually enjoy again.”
That decision became the turning point: to ring-fence part of the portfolio, create a new vehicle, and use it as the bridge from crisis to freedom.
The Turning Point: Choosing a New Path
With the decision made to protect part of the portfolio, the question became how to do it in a way that would both solve the immediate tax pressure and create a sustainable structure for the future.
During our consultation, we mapped out all 68 remaining properties in detail. This wasn’t just a valuation exercise; it was a deep dive into mortgages, equity, income streams, and the way the business operated day-to-day. For the first time in years, Martin could see the shape of his business laid out clearly instead of buried under the weight of the Hybrid LLP.
One thing was obvious: he didn’t need or want to move the entire portfolio. Transferring everything would have meant more borrowing than he was comfortable with and more complexity than he needed. Instead, we focused on the 16 properties with the strongest equity position and most stable income, a solid foundation for a fresh start.
From there, the strategy took shape:
- Sell those 16 properties into a newly created Family Investment Company (FIC) at full market value.
- Use the FIC as a clean, commercial vehicle outside of the Hybrid LLP.
- Free up liquidity to pay HMRC in full and remove the constant pressure of pending tax bills.
- Design the FIC not just for Martin’s retirement, but for his children to inherit value without inheriting operational chaos.
- Martin’s motivation shifted from damage control to building something positive.
“For the first time in years, I wasn’t thinking about what I was losing,” he told us. “I was thinking about what I could build again, and how I could do it right this time.”
That moment, when the conversation turned from crisis management to legacy planning, was when the new path really began.
The Plan: Creating the FIC
The first step was to create a clean vehicle that would carry the 16 properties forward without the baggage of the Hybrid LLP. That meant a Family Investment Company built from the ground up, structured not just for today but for the next generation.
Company Formation
- A new limited company was incorporated specifically to acquire the 16 properties.
- The purchase was set at full open-market value to establish a commercial basis for the transaction and create clear separation from the old LLP.
Share Structure
Martin’s goal was twofold: to remove himself from ownership while ensuring his children inherited value in a way that was fair and future-proof.
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Freezer Shares: Allocated to his children to lock in today’s value of the portfolio. These shares carried equal dividend rights, ensuring current income was split fairly between them from day one.
Growth Shares: Issued into three separate discretionary trusts, one for each bloodline. These captured all future appreciation beyond the frozen base value, ensuring long-term protection outside the children’s personal estates for Inheritance Tax purposes.
No Ordinary Shares for Martin: Martin deliberately retained no equity. His connection to the company would come via the Director’s Loan Account, ensuring a clean transfer of ownership from the outset.
Governance
To avoid repeating the mistakes of the past, we built governance into the FIC from day one:
- A formal shareholders’ agreement set out decision-making processes, dispute resolution mechanisms, and provisions for appointing professional management if needed in future.
- Roles and responsibilities were clearly defined to prevent operational burden falling on one child unfairly.
- The structure allowed ownership and management to be separated, giving the children choice without obligation.
For Martin, this was more than a technical plan.
“This time I wanted to get it right,” he said. “Not just for me, but for them. I wanted to hand them value without handing them a mess.”
Funding the Transition
With the Family Investment Company structured, the next challenge was funding the acquisition of the 16 properties in a way that achieved three objectives:
- Pay full market value to establish a clean commercial transaction.
- Generate enough liquidity to clear the remaining HMRC tax liabilities in one stroke.
- Leave Martin with a secure income stream and some long-overdue financial breathing space.
60% Corporate Mortgages
The company raised new corporate borrowing against the 16 properties at an average loan-to-value of 60%. This was higher than Martin’s original 33% leverage but still well within safe parameters for the rental income profile. The mortgages created the cash needed to fund part of the purchase price and provided the company with sustainable debt levels for the future.
Director’s Loan Account
The remaining 40% of the purchase price was left outstanding as a Director’s Loan Account (DLA) owed to Martin. This was only possible because of his conservative gearing before the transaction. The DLA served three crucial purposes:
Liquidity for HMRC: The combination of the new borrowing and the DLA allowed Martin to extract sufficient funds to pay the outstanding tax liabilities in full without any further fire sales.
Retirement Income: The DLA repayments provided a predictable cashflow, effectively replacing the income he had lost as the old LLP structure unravelled.
Gradual Wealth Transfer: The DLA created a flexible mechanism to pass value to his children over time through planned gifting, avoiding the need to rely on share transfers that could trigger additional tax later.
Stamp Duty Land Tax
Because the transaction involved 16 connected residential properties, the six-property rule applied. The company paid non-residential SDLT rates, with no 5% surcharge. Martin also loaned the company the funds to cover this SDLT liability as part of the DLA, ensuring the transaction was fully funded without eroding working capital.
More Than Just Bills
For the first time in years, the numbers worked in Martin’s favour. Once HMRC was paid, the structure left him with surplus liquidity. After years of watching properties disappear to cover tax bills, Martin finally had the freedom to invest in something for himself.
“I’d dreamed for years of buying a yacht and sailing the Mediterranean,” he told us. “I thought that dream had gone. This plan gave it back to me.”
Within months of completing the restructure, Martin signed the paperwork on a 46 ft yacht. For him, it wasn’t just a purchase. It was a symbol that he had turned the page, moving from survival to freedom.
The Tax Mechanics
The commercial transaction achieved more than just a structural reset, it also created an opportunity to manage future liabilities in a way that Martin could control during his lifetime.
No Incorporation Relief on Partial Transfers
Because only 16 of the 68 remaining properties were sold into the Family Investment Company, Section 162 Incorporation Relief under TCGA 1992 was never in play. Incorporation Relief applies only where an entire business is transferred as a going concern. In this case, the transfer was treated as a straightforward market-value sale of part of Martin’s rental business to a connected company.
That meant CGT was always going to arise on the gain between original cost and market value. The question was whether to proceed with the partial transfer at all given the tax cost, or to leave the properties where they were.
Why Proceed and Trigger CGT Now?
For Martin, the decision was about more than numbers. It was about taking control of his future and his family’s future:
Turning a Liability Into a Plan:
By treating the sale as a clean, commercial transaction, Martin could use the proceeds to pay HMRC in full and remove the constant pressure of pending tax bills. What looked at first like a cost became a strategic reset.
Managing Long-Term Inheritance Tax Risk:
The 16 properties carried substantial equity. Even if no further debt was repaid, realistic growth rates suggested their value could double or treble over the next 15–20 years. Had Martin died holding them personally, his children might have faced an Inheritance Tax bill of £3.2–£4.4 million on those assets alone. Triggering CGT now at prevailing rates created certainty and removed that future burden.
Clean Ownership for His Children:
“I wanted to hand over something they could manage, not a tax puzzle they’d have to solve without me,” Martin said. Selling the properties into the FIC at market value meant his children would inherit a company with no embedded gains and no deferred liabilities.
Funding Liquidity:
Because the transaction was a genuine sale funded by corporate borrowing and the Director’s Loan Account, Martin could meet the CGT liability from the proceeds rather than leaving his children to raise funds later under pressure.
The Mechanics
- The 16 properties were sold to the FIC at full market value.
- CGT was charged on the gains between acquisition cost and sale price as a connected-party transaction.
- The corporate mortgages and DLA generated sufficient liquidity to cover the CGT in full alongside SDLT and HMRC’s outstanding assessments.
This approach meant the Family Investment Company began life as a clean, debt-structured business with no hidden tax exposure and all future growth sitting within the new share classes and discretionary trusts designed to protect Martin’s family.
The Outcome
When the dust settled, Martin’s decision to restructure part of his business achieved far more than paying an overdue tax bill. It turned a crisis into a clean slate and created a legacy vehicle his children could inherit without fear or complexity.
For Martin
Tax Pressure Gone:
The sale of the 16 properties into the Family Investment Company generated enough liquidity to pay HMRC in full and settle the CGT arising on the gains. What had been a looming liability was converted into a final, controlled payment on Martin’s terms.
A Clean Business Vehicle:
By ring-fencing those properties into a company, Martin created a sustainable business outside of the Hybrid LLP. The FIC carried corporate debt at 60% LTV, balanced with the Director’s Loan Account as a flexible funding and income tool.
Predictable Retirement Income:
The DLA repayments replaced the income he had lost as the old LLP unravelled, giving him a steady cashflow without needing to manage those properties personally.
Personal Freedom:
With surplus funds left after paying HMRC and CGT, Martin finally achieved a long-standing dream. Signing the paperwork on a 46 ft yacht was more than a purchase; it symbolised moving from survival back to living.
“I didn’t just save part of my business,” he told us. “I saved my sanity and gave myself permission to enjoy the future again.”
For His Children
Full Ownership From Day One:
The FIC and all future growth were transferred to them immediately through the Freezer and Growth share design. Martin retained no equity, ensuring a genuine lifetime handover.
No Hidden Tax Bombs:
Because the CGT was crystallised and paid on the partial transfer, the company began life with a clean base value. The children will never face deferred gains or surprise liabilities on those 16 properties.
Choice Without Obligation:
The governance built into the FIC allowed them to benefit financially without being forced into management roles. With the Growth Shares held in discretionary trusts, the value is protected for future generations while keeping flexibility.
Continuity Without Chaos:
The restructuring ensured the rental income would continue uninterrupted on Martin’s death. There would be no probate freeze or forced sales under pressure.
One of his children summed it up perfectly:
“Dad didn’t just pass on properties. He passed on clarity. We can keep it, grow it, or one day decide to step back ourselves without the panic of trying to untangle a mess.”
Looking Ahead
Completing the transfer of the 16 properties achieved the immediate goal: paying HMRC, creating liquidity, and securing a legacy vehicle for his children. But it also changed Martin’s perspective on the rest of his business.
With the FIC now running smoothly and his children actively involved through the new governance structure, Martin has begun to consider whether to repeat the process with more of the remaining portfolio. Rather than rushing, he is using the success of this first phase as a model for a potential second transaction, one that could gradually migrate more of his properties into the company over time, without the pressure that drove the first restructure.
As Martin put it:
“For the first time in years, I feel like I have choices again. If I want to bring more of the portfolio into the company later, I can do it on my terms, calmly and with a plan, not in panic.”
Lessons for Other Landlords
Martin’s journey isn’t unique. Many landlords who entered complex structures in good faith now find themselves facing the same combination of pressure: punitive tax positions, forced property sales, and a business that no longer feels like theirs.
The key lessons from his case are both commercial and personal:
Partial Restructuring Can Be Powerful:
You don’t always need to move an entire portfolio to create a solution. For Martin, transferring 16 properties out of 68 was enough to stabilise the business, pay HMRC, and create a legacy vehicle for his children.
Phased Planning Creates Options:
A clean first transaction can act as a blueprint for the future. Martin’s case shows that you can restructure in stages, building stability and liquidity without rushing the entire business into one transaction.
Liquidity is as Important as Structure:
A Family Investment Company isn’t just a tax tool. In Martin’s case, it created the borrowing and Director’s Loan Account flexibility to clear immediate liabilities and secure retirement income without selling more properties.
Future Tax Risk Can Be Managed Now:
Crystallising CGT on the partial sale removed the risk of deferred gains and future Inheritance Tax compounding on growing equity. Planning during your lifetime gives you control over the numbers and the outcome.
Family Clarity is a Commercial Asset:
Designing the FIC with Freezer and Growth Shares, separate trusts for each bloodline, and clear governance avoided future disputes and ensured Martin’s children inherited value without inheriting burden.
Planning Early Creates Freedom:
The biggest win for Martin wasn’t technical. It was emotional. By acting now, he turned a crisis into a plan and gave himself back the freedom to live his own life without constant tax anxiety.
For landlords facing similar challenges, whether trapped in a Hybrid LLP, worried about IHT exposure, or simply wanting to pass on value without chaos, Martin’s case shows there are options beyond fire sales and panic decisions.
How We Help
Martin’s case is a clear example of how the right structure at the right time can turn a business around, even under pressure. It also shows why having a guided, commercial process matters more than just technical tax advice.
At Property118, our £400 fixed-fee consultation is designed to give you the same clarity and control Martin achieved. It is not a template exercise or a few generic questions, it is a structured, detailed process built for portfolio landlords.
What the Process Involves
Secure Online Fact Find:
A comprehensive, conditional-logic questionnaire designed to capture the full shape of your business and family dynamics, including ownership structures, lending, equity, and goals.
Detailed Scenario Mapping:
We use your real numbers to model different options side by side, from partial portfolio transfers to full FIC restructuring, showing the commercial and family impact of each path.
Tailored Planning Report:
A plain-English report, written specifically for you, that explains the recommended structure, the funding mechanics, and the governance needed to protect your family and business.
Up to Five Follow-Ups Included:
Your fixed fee includes up to five email exchanges to clarify details, ask questions, and refine the plan without hidden costs.
If You Decide to Proceed
If you choose to implement our recommendations, we can project-manage the entire process, including liaising with your existing advisers or introducing trusted professionals who understand portfolio landlords. Fees for this are quoted individually depending on complexity.
Why This First Step Matters
Whether you are in a crisis like Martin or simply planning ahead, the first step is the same: getting clarity. It is about understanding your options, mapping the numbers, and making decisions on your terms rather than under pressure.
Martin’s story proves that even when a situation feels overwhelming, a clean structure can provide liquidity, security, and peace of mind for you and for the next generation.
⚖️ Important Notice – Scope of Planning Support
Property118 does not provide formally regulated or insured advice on law, tax, or financial services, including life insurance, mortgages, pensions, or investment products.
Our role is to present researched planning recommendations based on our interpretation of current legislation, HMRC guidance, established case law, and our extensive experience supporting UK landlords.
While our bespoke recommendations are always based on detailed research, we strongly recommend that you share them with appropriately regulated professional advisers, such as your solicitor, accountant, or financial adviser, and ask them to review and confirm the correct legal and tax treatment before proceeding.
Specific regulated responsibilities include:
- Tax calculations and filings – Your accountant
- Stamp Duty Land Tax and equivalents – Your solicitor
- Company structuring – Your accountant
- Legal drafting – Your solicitor or Barrister
- Trust, wills, and succession planning – A STEP-qualified solicitor or trust specialist
- Life cover, pensions, and other financial services – An FCA-regulated financial adviser
Property118 is happy to work with your existing advisers or introduce you to trusted professionals. Our planning is designed to support you in making commercially led decisions that can then be implemented through appropriate regulated channels.