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HMRC internal manual

Lloyd's Manual

Conversion: Scottish limited partnerships: types of partner

Lloyd’s SLPs are usually mixed partnerships involving individuals and at least one limited company (the general partner). The partnership rules in Part 9 of ITTOIA 2005 and Chapter 7 of Part 4 ICTA 1988 provide for the profit or loss of each class of partner to be arrived at separately for tax purposes, by regarding the partnership first as if it were an individual and then secondly as if it were a company. Regulation 3 SI1997/2681 provides the main rule governing the interaction of this principle with the specific Lloyd’s legislation.

Individual partners’ profits

For the purpose of computing the profits of individual partners, the SLP is regarded as if it were itself an individual member of Lloyd’s. The normal rules on individual Names in FA93 and the relevant regulations are then applied (subject to the modifications described below) and the proportion of the resulting profit or loss that corresponds to the share of the commercial profit or loss allocated to the individual partners taken together is allocated among them.

Partners who are Names in their own right: treatment of expenses

All receipts and expenses relating to a partner in an SLP must be included in the partnership return. If individual or company partners are also members of Lloyd’s in their own right any expenses relating to their own membership of Lloyd’s must be taken into account separately in their own return, as such partners conduct two separate trades, one as an underwriting member of Lloyd’s and the other as a partner in an underwriting business carried on by an SLP.

Corporate partners’ profits

The only corporate partners in SLPs which have so far been set up are general partners. Computations for these partners are mainly fairly straightforward as income and gains are not attributed to the general partner. The general partner may in practice only receive a fixed fee from the other partners. In some cases the general partner receives no partnership income. In these cases, fees are paid directly to the corporate parent involved in management of the SLPs.

Should a company become a limited partner in a SLP, for the purpose of computing the profits of the corporate partner the SLP is regarded as if it were itself a corporate member of Lloyd’s. The normal rules about corporate members in FA94 and the relevant regulations are then applied (subject to the modifications described below) and the proportion of the resulting profit or loss that corresponds to the share of the commercial profit or loss allocated to the corporate partners taken together is allocated among the corporate partners.

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Non resident partners

If any of the members of the partnership are non-UK resident, it is necessary to complete a third Partnership Statement and associated pages treating the partnership as though it were an individual not resident in the UK, but only if this would result in different figures. This will be the case where any of the members of the partnership are not ordinarily resident and non-domiciled. This is because gains or losses on FOTRA securities are excluded from UK tax for non-resident and non-domiciled individuals by FA96/S154 (2), and are therefore excluded from the computation of partnership profits.