TBA & Associates

UK Limited Liability Partnership
General Overview

One of the newest entity options
Granting you full tax exemption

The Limited Liability Partnerships Act of 2000 marked the introduction of a UK equivalent to the American limited liability company (LLC). Like its American counterpart, the UK LLP is governed by an Operating or Limited Liability Partnership Agreement. It can be structured to enable non-UK resident individuals conducting business outside the UK to establish a British entity without incurring UK taxes. However, it’s crucial to note that the specific tax implications may vary based on double taxation treaties and the provisions of the Partnership Agreement.

The UK tax authorities have confirmed that a limited liability partnership’s tax base follows the partnership taxation procedure. The UK LLP itself is not directly liable for taxes on profits generated within the partnership. Instead, these profits are assessed separately for each individual partner.

To be eligible for LLP status, the venture must operate commercially and aim to make a profit. Changes in tax rules are expected to clarify that a limited liability partnership cannot be used for charitable purposes or investments in shares or property.

The benefits of this structure include the absence of personal liability for members concerning the LLP’s contracts or debts, along with limited liability for the negligence of other members. This makes LLPs an attractive option for professions and international businesses run by non-resident partners outside the UK, potentially offering tax advantages in the context of multinational business ventures.

Tax Planning Credentials

Assuming the correct structure is utilized and there are no UK activities or ultimate UK beneficial owners, the Inland Revenue is unlikely to impose UK taxes at either the corporate or individual level. If a UK Limited Liability Partnership consists solely of non-resident partners and does not engage in UK business, it will not be subject to UK taxation.

A UK LLP does not require a UK partner, and non-resident partners should not incur UK income tax or corporation tax on income from a UK LLP if the LLP conducts its business entirely outside the UK.

While the LLP structure was not initially intended for investment business or property holding, tax treatment remains uncertain for such ventures.

A UK LLP is required to prepare balance sheets and profit and loss accounts for each financial year, with a copy of the auditor’s report, which must be submitted to the Registrar of Companies. Small LLPs may be exempt from this audit requirement based on criteria related to assets, turnover, and company structure.

UK Limited Liability Partnership
UK LLP Taxation

The explanatory notes accompanying the initial draft of the UK LLP Bill made it clear that, for all tax purposes, an LLP is treated as a partnership, and its members as partners. Section 10 of the LLP Act specifies that when an LLP conducts a business with the intent of making a profit, its members will be treated as partners for the purposes of income tax, corporation tax, and capital gains tax. Section 125 of the 1995 Finance Act restricts the tax liability of non-resident partners in a United Kingdom partnership to their share of the profits generated from the business conducted in the UK, especially when the partnership operates both in the UK and abroad.

This means that when a non-resident partner receives profits from a UK LLP related to a business conducted entirely outside the United Kingdom, there should be no imposition of UK income tax or corporation tax.

A UK LLP used for Investment Business or Property Holding

The Inland Revenue Tax Bulletin Issue 50 has clarified that a UK LLP engaged in a trade or profession is classified as a partnership for tax purposes. However, this guidance does not extend to the taxation of investment businesses or property holdings, for which the LLP structure was not originally designed. Therefore, it is not recommended to employ a United Kingdom LLP for investment business unless there is clarity on how the UK Revenue intends to tax such activities.

UK Limited Liability Partnership
Is an Audit Required for a UK LLP?

Members of an LLP are obligated to prepare a balance sheet and profit and loss account for each financial year of the LLP. These accounts, along with an auditor’s report, must be submitted to the Registrar of Companies. Small LLPs may be exempt from this audit requirement. To qualify as a small LLP, the entity’s gross assets should not exceed £1.4 million, and its turnover should not exceed £1 million. Furthermore, the LLP should not be part of a scenario where a Public Company is a member, or when it is not classified as small. It’s important to note that partners are still obliged to prepare and submit accurate and fair accounts

General LLP Benefits

The UK is a pro-business environment with limited bureaucracy.

Establishing a virtual office presence in London offers a domestic image.

LLP formation documentation, including the LLP Agreement, is highly flexible.

Documents can be quickly apostilled pursuant to the Hague Convention of 1961.

The UK is a reputable and credible jurisdiction.

Various office address options are available.

UK LLPs can be registered within seven working days (expedited service available).

The country boasts a well-educated population.

Corporate and general laws are highly developed.

Operating as a UK registered entity carries prestige.

Annual Companies House duties are relatively low.

Fiscal transparency applies to both domestic and non-resident LLPs.

Non-resident LLPs can be managed externally from low-tax or tax-exempt jurisdictions.

Incorporation is a straightforward process, tailored for simplicity. If an LLP aligns with your business venture, TBA & Associates can provide tailored LLP incorporation services to streamline the process. Our focus is on delivering top-tier service to our clients, whether for UK residents or international businesses. We excel in both local and global aspects, giving our clients a competitive edge in the international market. We offer comprehensive solutions for UK Limited Liability Partnership formation, including legal aspects, irrespective of your intended business form or operational mode.

We believe that all our clients deserve the best service we can offer. Thus, we provide only one level of service, which is of the highest quality. While we may not be the most inexpensive company formation provider, we offer outstanding value for money at affordable rates, without sacrificing quality or introducing hidden fees.

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Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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