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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Partnerships, limited partnerships and limited liability partnerships


There is no statutory definition of the word `partnership’ in TCGA 1992, however, section 1 (1) Partnership Act 1890 defines ‘partnership’ as `the relation which subsists between persons carrying on a business in common with a view of profit’, see BIM72001.

The rules in section 2, Partnership Act 1890, see BIM72505, should be applied to determine whether, for CG purposes, there is a partnership or merely some other form of co-ownership of assets, for example, a joint tenancy.

In England, Wales and Northern Ireland a partnership is not a legal person or legal entity distinct from the partners. However, a partnership is a ‘person’ for all purposes of the Taxes Acts unless the contrary intention appears, see Schedule 1 Interpretation Act 1978. TCGA92/S59 (1) indicates such a contrary intention as it treats partners as persons chargeable to tax on gains arising on disposals of interests in partnership assets rather than the partnership itself.

The treatment of partnerships In Scotland as legal persons distinct from the partners (section 4 (2) Partnership Act 1890) is overridden for CG purposes, TCGA92/S59 (1)(a), see BIM72035.

Limited Partnerships

A limited partnership created under the Limited Partnership Act 1907 is one in which at least one of the partners restricts their liability for the debts and obligations of the firm to a pre-determined sum instead of bearing unlimited liability.

It must be registered with the Registrar of Limited Partnerships in London or Edinburgh as appropriate.

A limited partnership consists of at least one general partner (who manages the business and bears unlimited liability to creditors) and at least one limited partner. A limited partner contributes a specified amount of capital on joining the partnership but does not bear any liability to creditors or other partners in excess of its contribution and undrawn profits.

TCGA92/S59 applies to the general and limited partners of a limited partnership as it does to partnerships formed under the Partnership Act 1890.

The British Venture Capital Association issued a Press Release on 26 May 1987 on UK venture capital investment funds set up as limited partnerships for the purpose of raising funds wholly or partly for equity investment in unquoted companies. It refers to guidelines agreed with HMRC which are reproduced at CTM36580.

Limited Liability Partnerships

Limited Liability Partnerships (LLPs) are bodies corporate under the Limited Liability Partnership Act 2000.

LLPs combine the organisational flexibility of partnerships with the benefit of limited liability for their members. As bodies corporate they are subject to certain aspects of company law and have a corporate personality distinct from their members.

Further information on LLPs is available at BIM82101+.

TCGA92/S59A applies where a LLP is carrying on a trade or business with a view to profit. It mirrors TCGA92/S59 in that it provides that any dealings by a LLP are treated for CG purposes as dealings by the individual members. Therefore each member of a LLP to which TCGA/S59A (1) applies is regarded as owning a fractional interest in each of the LLP’s assets and not an interest in the LLP itself and any CGT or CT on chargeable gains due on a disposal of an asset by a LLP is charged on its members separately.

Further guidance on the CG treatment of LLPs and their members is given at CG27050+.