Q&As

What are the UK tax consequences where a English general or limited partnership converts to a UK limited liability partnership (LLP)?

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Published on LexisPSL on 29/06/2020

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • What are the UK tax consequences where a English general or limited partnership converts to a UK limited liability partnership (LLP)?
  • Tax transparency
  • Income/corporation tax
  • Gains
  • SDLT
  • VAT
  • Other issues

What are the UK tax consequences where a English general or limited partnership converts to a UK limited liability partnership (LLP)?

Tax transparency

A general or 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 referred to as tax transparency ie the legislation 'looks through' the partnership to tax the underlying partners For further information, see Practice Notes: Taxation of limited partnerships and Taxation of general partnerships.

An limited liability partnership (LLP) is regarded as a separate legal entity, but if it carries on a trade, profession or business with a view to profit it is regarded for tax purposes as if it were a partnership ie it is also tax transparent. For further information, see Practice Note: Taxation of UK LLPs. For background on LLPs generally, see Practice Note: The nature of a limited liability partnership and its legal framework.

Income/corporation tax

Broadly, where a partner carries on a trade through a partnership and then starts to carry on the same trade through an LLP, they are regarded for income/corporation tax purposes as continuing to carry on the same trade. This in itself does not cause a cessation or commencement of trade

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