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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Partnerships: Limited Liability Partnership (LLP): partners’ basis periods, losses and overlap relief

Where a partnership carries on a trade or profession each partner liable to Income Tax is deemed to carry on a personal trade or profession. The basis period rules are applied to that deemed trade or profession and any overlap profit is personal to each partner.

If, on conversion, a LLP succeeds to the business previously carried by an old partnership then a partner’s personal trade or profession is regarded as continuing.

In these circumstances and provided that the conditions for the relief are otherwise met:

  • a member of an old partnership may carry forward the balance of any loss relief to which they may be entitled against their share of future profits made by the LLP, and
  • a member of a LLP may carry back and set off any terminal loss relief to which they may be entitled against their share of profit which accrued to them whilst a member of the old partnership.

Further they will be entitled to a deduction for the overlap relief which accrued to them whilst a member of the old partnership at the time they finally retire from the LLP (or perhaps earlier if the LLP changes its accounting date).