Taxation of limited partnerships
Taxation of limited partnerships

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Taxation of limited partnerships
  • General features of a limited partnership
  • Restriction of loss relief
  • Interest relief for individuals
  • National insurance contributions for limited partners
  • Limited partnerships as fund vehicles

This Practice Note considers specific tax provisions relevant only to a limited partnership formed under English law (as opposed to a general partnership, a limited liability partnership (LLP) or a limited partnership formed under Scottish law).

Like a general partnership, but unlike an LLP, a limited partnership is not a body corporate but is a relationship between its partners. As it is a type of partnership and not a body corporate, it is treated for most tax purposes in the same way as a general partnership (for details, see Practice Note: Taxation of general partnerships).

In particular, a limited partnership is not taxable in its own right. Instead the partners are taxable on their share of the partnership's profits and gains (or can claim relief for their share of its losses), whether or not the profits and gains are distributed to the partners. This is sometimes referred to as tax transparency; the legislation 'looks through' the limited partnership to tax the underlying partners.

There are some tax provisions that are specific to limited partners (and sometimes, to partners in a general partnership who act as though they were limited partners). These specific provisions are described in this Practice Note and relate to:

  1. restriction of loss relief, and

  2. interest relief for individuals

The capital gains treatment of a partnership, including a limited partnership, is described