Tax treatment of limited liability partnerships
Published 11 March 2020
© Crown copyright 2020
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/tax-treatment-of-limited-liability-partnerships/tax-treatment-of-limited-liability-partnerships
Who is likely to be affected
Limited Liability Partnerships that carry on a trade, profession ‘without a view to profit’.
General description of the measure
This measure provides that in circumstances where an Limited Liability Partnerships has delivered an Limited Liability Partnership return on the basis of operating ‘with a view to profit’ and is subsequently found to be operating ‘without a view to profit’, HMRC can still amend the Limited Liability Partnerships members’ returns based on the Limited Liability Partnership return as originally submitted.
It is introduced with retrospective and prospective effect but does not introduce any additional obligations or liabilities for customers.
Policy objective
This measure will ensure that all Limited Liability Partnership members are treated equally and fairly for taxation purposes under the law as they always have been.
Background to the measure
The measure was announced at Budget 2020.
The measure preserves the status quo for the vast majority of Limited Liability Partnership customers that operate with a view to profit who will not experience any change at all.
Detailed proposal
Operative date
The measure has retrospective and prospective effect from the date of Royal Assent to Finance Bill 2020.
Current law
Current law relating to the making and delivery of Limited Liability Partnership and general partnership tax returns is contained within sections12AA Taxes Management Act 1970, 863 Income Tax (Trading and Other Income) Act 2005 and 1273 Corporation Tax Act 2009 and s1(1) Partnership Act 1890.
Proposed revisions
Legislation will be introduced in Finance Bill 20 with retrospective and prospective effect to affirm the long accepted and expected position by customers and HMRC, that deeming provisions that treat Limited Liability Partnerships as partnerships and their members as partners, continue to work as they always have done.
Customers who have submitted Limited Liability Partnership returns will notice no difference in the treatment of their returns.
Summary of impacts
Exchequer impact (£m)
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure has no impact on individuals as it relates to Limited Liability Partnerships.
There is expected to be no impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is not expected to have any direct impact on businesses as it merely affirms the existing policy and practice that Limited Liability Partnerships are treated for taxation purposes on the same basis as other partnerships which has been the case for over 18 years.
Customer experience is expected to improve because of increased certainty
There is not expected to be any impact on civil society organisations.
Operational impact (£m) (HMRC or other)
This measure is not expected to have any operational impact as it merely affirms the existing policy and operational practice that Limited Liability Partnerships are treated for taxation purposes on the same basis as other partnerships which has been the case for over 18 years.
No Justice Impact Test is required as there is nil impact.
Other impacts
No other impacts have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact Jim Fedigan, Tax Administration Policy & Strategy by telephone: 03000 547075 or email: jim.fedigan@hmrc.gsi.gov.uk.