A farm partnership agreement provides for a partner to introduce land as capital and to be recognized in a separate Land Capital Account. The agreement provides that any gains arising on a disposal or a revaluation will be credited to the specific Land Capital Account to which that land is credited and shall belong to the partner who holds the interest in that LCA.
My concern is that on death (or retirement), the partnership is not dissolved and so the assets remain partnership property. Therefore, in the event of a partner’s death, he will have a disposal for Capital Gains Tax purposes of the land because only property that he is competent to dispose of in his will has the CGT free uplift on death.
However advisers who drafted the partnership agreement say that ‘The nature of the partnership is such that the land is held in what is known as a ring fenced capital account which means it is still the individual’s for CGT purposes. This then gets CGT uplift on death.’
Are they correct?