HMRC is warning landlords not to use a tax avoidance scheme, designed to reduce the tax on profits from buy-to-let properties.

The scheme which is run by Less Tax 4 Landlords uses a hybrid partnership structure where limited companies are set up to hold the properties which are then transferred to an limited liability partnership (LLP). The LLP allocates profits to members, thereby avoiding tax.

The scheme impacts interest relief restrictions, tax on profits and CGT, however HMRC says that it is a tax avoidance scheme and has warned landlords not to use it. For the hundreds who have, HMRC say they must stop and "settle their tax affairs". It is estimated that it has saved or avoided (depending on which way you look at it) around £50m in tax receipts to date. Less Tax 4 Landlords advise that they are seeking clarification on the scheme. 

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