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Tax Period for an LLP

I have a new client which is an LLP, and this is the first time I have done one.  I hadn't realised how different they were!  It doesn't appear to follow the rules of a limited company, nor a partnership - so I've spent ages researching it.

The LLP was incorporated on 15 July 2008 and the year-end is 31 July 2009. 

I read the following: "In general, the tax return will include the results for the accounting period ended within the fiscal year.  For example, if an LLP has a 30 June year end, the 2009/10 return would include results for the accounting period ended 30 June 2009."  It does though state that there are special rules that apply if there is no accounting period ended in the tax year - so this LLP was trading in 2008/9 but didn't have an accounting period end.  Or does this not matter if it only started in that year?

Can you please tell me whether the whole period is dealt with under the 2009/10 return, or whether it has to be split between the 2008/9 and 2009/10 year-ends.

The client only approached me 2 weeks ago, and they hadn't registered the LLP with HMRC (a different story altogether), so I want to make sure I'm clear on the tax requirements here.

Thanks for any help you can offer.

Liz

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01st Mar 2010 09:26

LLP

As far as tax is concerned you "look through" the LLP and treat it like a partnership. So a July 08 - July 09 period, will need opening years rules applied for the partners' profits to 5 April 09, then you assess 09/10 on the APE to July 09, which is where your overlap profits arise, assuming there is a profit.

 

If you have a corporate partner you need to do 2 comps, one under corporate rules, and one under income tax rules for any indivuidual partners.

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By eyreliz
01st Mar 2010 09:42

Thank You

Thank you for such a speedy response.  It would be difficult to see how it could be any more complicated!

Do the profits get split pro rata, or based on the actual profit in each separate period?

 

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01st Mar 2010 10:56

LLP

Usually you would time apportion, but you can do the exact if it gives a more reasonable result.

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By Anonymous
01st Mar 2010 16:49

consider changing the year end

If the first accounting period was shortened so as to end on 31 March you would save a great deal of time an energy with each year's tax calculations - especially if the LLP is to receive interest; and in dealing with overlap relief for new partners if (as often happens) they join atthe start of a new year.

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By eyreliz
02nd Mar 2010 10:31

Can I shorten the second year?

Thanks for the advice on changing the year-end.  The accounts would now be late if I reduce the accounting period (and I'm not sure if it would now be possible).

What if I make the second year a 9 month period? 

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By stgreg
02nd Mar 2010 20:10

yes but....

You can make the second accounting period a short one (you can shorten as often as you like) and this would simplify things for future partners but the original partners would have overlap releif and "complicated" opening years.

 

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By eyreliz
03rd Mar 2010 10:05

Thanks for all the advice

Thanks All,

I have a meeting with the client on Monday, so I'll find out what's best for them.  Now I feel much better prepared.

Liz

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