Business vehicles

Business vehicles

When one or more individuals decide to start a business, they have a choice as to what vehicle they use to operate that business. In addition to the commercial and legal reasons which help determine that choice, the tax treatment of each form of vehicle is often a decisive factor in whether it is appropriate for carrying on a particular business.

What choices are available?

The main UK business vehicles available are:

•
a sole trader
•
a general partnership
•
a limited partnership
•
a limited liability partnership, and
•
a company

A summary of the tax consequences of operating a business in each of those structures is found in Practice Note: Forms of business vehicle—tax summary, and a table briefly comparing them is found in: Choice of business vehicle—tax comparison table. For specific rates and thresholds applicable to the current tax year, see Practice Note: Key UK tax rates, thresholds and allowances.

What tax issues arise?

The factors relevant to the tax element of the decision between different business vehicles are:

•
layers of tax—the number of taxable entities involved in the structure
•
current

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Tax News

Tax weekly highlights—6 November 2025

This week's edition of Tax weekly highlights includes: (1) analysis of the First-tier Tax Tribunal’s (FTT) decision in Ferrero UK Ltd v HMRC concerning the VAT treatment of biscuits, (2) further analysis of the Supreme Court’s decision in Northumbria Healthcare NHS Foundation Trust v HMRC concerning the VAT treatment of car parking supplies by a public body, (3) analysis of the FTT’s decision in Boulting v HMRC concerning the tax treatment of a company’s purchase of its own shares from an outgoing shareholder, (4) analysis of the Upper Tribunal’s (UT) decision in HMRC v Ducas Ltd concerning the FTT’s powers to direct extended disclosure of documents by one party but not the other, and (5) the Welsh Government’s publication of its Draft Detailed Budget Report for 2026-27 and a consultation on Welsh taxes reform.

UT rules that there is no general principle that extended disclosure in FTT proceedings must be reciprocal (HMRC v Ducas Ltd)

Tax analysis: In HMRC v Ducas Ltd, the Upper Tribunal (UT) dismissed HMRC’s appeal against the First-tier Tax Tribunal’s (FTT) case management directions, which included a direction requiring HMRC to disclose documents in its possession or control which supported the taxpayer’s case or undermined HMRC’s case but no equivalent direction for the taxpayer. Rejecting HMRC’s argument that the FTT had erred in law by not imposing a reciprocal obligation, the UT found that there was no general principle of reciprocity and that the FTT had not acted irrationally.

Government urged to make 'major changes' to plans on IHT and pensions

Law360: The government should give 'much more thought' to its plans to apply inheritance tax (IHT) to wealth transferred through pensions to ensure the proposals are implemented fairly and effectively, Lane Clark & Peacock LLP (LCP) has said.

Supreme Court rules that hospital car parking charges are subject to VAT (Northumbria Healthcare NHS Foundation Trust v HMRC)

Tax analysis: In Northumbria Healthcare NHS Foundation Trust v HMRC, the Supreme Court decided that supplies of hospital car parking by an NHS Trust were subject to VAT because the Trust was acting as a taxable person, rather than as a public authority, when it operated the car parks. This was because the legal conditions under which the Trust made the supplies were no different, because of the Trust’s function as a public authority, from the legal conditions under which private sector providers made similar services.