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HMRC internal manual

Company Taxation Manual

Particular topics: companies in partnership: limited and limited liability partnerships

Limited partnerships

Partnerships formed under the Limited Partnerships Act 1907 are partnerships in which the liability of at least one of the partners for the debts and obligations of the firm is restricted to a set amount.  They are described in BIM82101.  A limited partnership may consist of individuals or companies or a mixture of both.  A limited partnership is required by law to have at least one partner with unlimited liability, known as a general partner, but the general partner may itself be a limited liability company.

For company partners, CTA10/S56 restricts the amount of relief against other income available to limited partners for losses, capital allowances and interest received or paid in connection with a trade carried on by a limited partnership.  The legislation restricts ‘sideways’ relief for these items to the amount of capital which the limited partner has contributed to the partnership.  Any excess may only be relieved against profits of the partnership trade.  Detailed guidance is at BIM82105.

Limited Liability partnerships

With effect from 6 April 2001 the Limited Liability Partnership Act 2000 introduced a new corporate business entity to Great Britain - the Limited Liability Partnership (LLP).

LLPs are, by statute, bodies corporate with legal personality separate from their members.  The liability of a member to the LLP’s debts is generally restricted to the amount of capital they have contributed to the LLP.

An LLP is a body corporate but an LLP which is carrying on a trade or business with a view to profit is treated for specified tax purposes as a partnership.  The income tax and corporation tax provisions are at ITTOIA07/S863 and CTA09/S1273.  Detailed guidance is at BIM82110 - BIM82155.  The guidance relating to the restriction of relief for losses and interest for members of an LLP that carries on a trade is at BIM82135.

The normal tax exemptions relating to

  • income received by a pension fund,
  • the pension business of life insurance companies, and
  • the tax exempt business of friendly societies in their capacity as a member of an LLP that carries on a property investment business

are disapplied  – see BIM82155.