Limited Liability Partnerships in the UK: What to know?

The Limited Liability Partnership Act 2000 introduced a new joint venture organization to Great Britain – the Limited Liability Partnership (LLP) from April 2001. LLPs are legally business organizations which exist as a distinct and different entity from their members.  The responsibility of a member to the LLP’s dues or obligations is generally limited to the amount of money they have invested in the LLP.

The foremost advantage of an LLP is that the minimum of two designated members required to form the partnership are not restricted by nationality or residence. These two designated members take responsibility of managing the LLP and are required to complete additional duties in comparison to other ordinary members. Some of these important tasks include:

Limited Liability Partnerships (LLP) Process

• Appointing an auditor (if required)
• Signing the yearly account books of the LLP
• Delivering this yearly account statement to Companies House
• Notifying the Registrar of Companies regarding modifications in membership, registered office or LLP name

In order for the LLP’s financial position to be determined at any given point in time, it is mandated to maintain records of its financial transactions in sufficient detail.

Accounts are to be delivered to the registrar of Companies no later than 9 months after the end of the relevant period.  If there are delays, a penalty is usually levied.

Taxation

Probably the most common reason to register a company as a Limited Liability Partnership (LLP) in the UK is to use it as a tax efficient vehicle for non-UK international trading purposes.

This is because LLPs happily marry the benefits of corporate status (i.e. the partnership has its own legal identity) and protection in the guise of limited liability for members.  Combine this with the ability to operate and to be taxed as a traditional partnership, and the recipe for an ideal business scenario presents itself with ease.

LLPs are ‘tax transparent’ which translates to the fact that each member (not the partnership as a whole), will be taxed only on their share of the LLP’s income or gains. Any source of income from a non-UK source made by an LLP will not be subject to UK tax unless the members are UK resident individuals or companies.

The arrangements for income and corporation tax are laid out in ITTOIA07/S863 and CTA09/S1273. The instructions for the limitation of exemptions for losses and interest for members of an LLP are specified at BIM82135.

However, it may bode well to note that there is an obligation for an LLP to file an annual partnership tax return whether the partners are taxed or not.

Because LLPs can prove to be excellent vehicles owing to the combined benefits of limited liability protection and the ability to operate and be taxed as a partnership, they are a very popular choice for start-ups and businesses that have an interest outside of the UK. With the possibility of structuring it in such a way so as to minimize UK taxation, this extremely flexible vehicle for international trade can be a great choice.

The Conclusion

This where DataTracks steps in to ensure the best and most prudent possibility of taxation is carried out for the running of a successful business in the UK. Our experienced team of financial advisors are available to help with:

• Filing of all company tax returns and financial statements for accounting period in iXBRL arrangement online as per the instructions of HMRC. This will also include other details like calculations, accounts.
• Submission of VAT Returns for Companies which are registered for VAT and have a yearly taxable revenue in excess of 85,000 Pounds using the MTD service and applicable software for the same.
• Submission of CBCR (Country by Country reporting) reports in XML arrangement to the tax officials.
• Helping Banks, Investment firms, Insurance and Reinsurance companies filing reports to local and central authorities of countries in the European Union as per their specifications and instructions of ESMA, EIOPA and EBA.