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HMRC internal manual

VAT Refunds Manual

Who is entitled to claim: partnerships

General partnerships in England and Wales and Northern Ireland

Partnerships do not have legal personality. It is the partners jointly who carry on the business of the firm and all rights and obligations lie jointly and severally with the partners.

While a partnership continues, claims must be made by one of the partners and repayments must be paid into the partnership’s trading account. We would normally expect the claim to be made in the name of the partnership, that is, the firm name or the name which is shown on the VAT register for the claimant. However, any person who has signed the Form VAT2 for that partnership and has not notified us in writing under regulation 5 of the VAT Regulations 1995 that they have ceased to be a partner may make

  • a claim for over-declared VAT under section 80 of the VAT Act 1994 by a partnership, or
  • a claim for an amount of input tax under-claimed by a partnership.

Once the partnership has been dissolved, claims may be made by any person who acted as a partner in the firm, for any period during which he acted as a partner.

For example, if a partnership of Mr Anatole, Mrs Berthe and Miss Célestine

  • overstates its output tax liability, or
  • understates its input tax entitlement

and, shortly thereafter, is dissolved, the claim may be made by Mr Anatole, Mrs Berthe or Miss Célestine either jointly or individually.

If output tax is over-declared or input tax understated by a partnership comprising Mr Anatole, Mrs Berthe, Miss Célestine and Dr Désiré and, after a year, Miss Célestine and Dr Désiré leave so that there only remains a partnership of Mr Anatole and Mrs Berthe which is disbanded a year later, Mr Anatole and Mrs Berthe can claim for over-declarations/understatements made during the entire life of the partnership whereas Miss Célestine and Dr Désiré can only claim for the periods during which they were partners.

When dealing with claims from partners of firms that have been dissolved or claims from ex-partners of existing firms, you should be very careful to ensure that claims are not duplicated. You should be able to find the names of all partners, past and present, and their periods of membership of the firm on the VAT2 forms on Electronic Folder.

General partnerships in Scotland

Under section 4(2) of the Partnership Act 1890,

‘….In Scotland a firm is a legal person distinct from the partners of whom it is composed ….’

As a result, it is the firm that has the right to make a claim under Section 80 of the VAT Act 1994, not the individual partners.

Thus a claim may only be made under section 80 (output tax) or under regulation 29 (input tax) by the firm and payment may only be made to the firm.

You should take care when dealing with claims by partners of firms which have become dissolved in Scotland. Payment should be made to ‘the dissolved firm of …’. If the claimants object to this, for example because the bank account in the name of the firm has been closed, you should be satisfied that the partner making the claim has the authority of the other partners and that there is no duplication of claims.

Limited partnerships in England and Wales and Northern Ireland

A limited partnership is a partnership constituted under the Limited Partnership Act 1907 and comprises

  • a number of partners who are general partners, and
  • a number who are limited partners.

Limited partnerships will be registered on the Register of Limited Partnerships kept by the Registrar of Companies. If it is not registered, it should be treated as a general partnership with all partners being treated as general partners.

Limited partnerships do not have legal personality. It is the general partners who carry on the business of the firm and it is they who bear the liability for the debts and obligations of the firm. The limited partners are not involved in the running of the business and are only liable for debts to the extent of the capital that they have introduced into the partnership. A limited partnership cannot sue or be sued in the name of the firm and all rights and obligations lie jointly and severally with the general partners - not the limited partners.

So while the partnership continues in existence, claims must be made by one of the general partners and repayments must be paid into the partnership’s trading account.

However, once the partnership has been dissolved, claims may be made by any person who acted as a general partner in the firm, for any period during which he acted as such.

When dealing with claims from partners of firms that have been dissolved or claims from ex-partners of existing firms, you should be very careful to ensure that claims are not duplicated. You should be able to find the names of all general partners, past and present, and their periods of membership of the firm on the VAT2 forms on Electronic Folder.

You should also ensure that any claim from a limited partnership is made by one of the general partners and not by any of the limited partners.

Please note that limited partnerships and limited liability partnerships are different things.

Limited partnerships in Scotland

Limited partnerships in Scotland have legal personality separate from the persons that comprise them (section 4(2) of the Partnership Act 1890 and section 3 of the Limited Partnership Act 1907).

As a result claims are to be made by, and are payable to, the firm.

You should take care when dealing with claims by partners of Scottish firms which have become dissolved. Payment should be made to ‘the dissolved firm of …’. If the claimant takes objection to this, for example because the bank account in the name of the firm has been closed, you should be satisfied that the partner making the claim has the authority of the other partners and that there is no duplication of claims.

Please note that limited partnerships and limited liability partnerships are different things.

Limited liability partnerships

Section 1(2) of the Limited Liability Partnership Act 2000 provides that:

‘(2) A limited liability partnership is a body corporate (with legal personality separate from that of its members) which is formed by being incorporated under this Act; and—

…references to a limited liability partnership are to such a body corporate.’

The result is that claims under section 80 of the VAT Act 1994 (output tax) or under regulation 29 (input tax) may only be made by, or on behalf of, the limited liability partnership (LLP) and repayments can only be made to the partnership.

Ex-partners cannot make claims for amounts

  • over-declared by way of output tax, or
  • unclaimed by way of input tax

by an LLP after it has been dissolved.

A limited liability partnership will be registered on the Register of Limited Liability Partnerships maintained by the Registrar of Companies. If they are not registered, they should be treated as general partnerships with all partners holding the rights and liabilities of general partners.