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Company tax treatment of dividend income from LLP

Client is a member of LLP and has been allocated dividends from another UK company

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My client, when I took them on, was a straight forward micro trading company who did increasingly more work for an LLP.  In recent years, the company has bought into the LLP and become a member.  Each year there is the company's profit share from the LLP which is subject to Corporation Tax.

This year, however, the Partner statement from the LLP specifies an income line of, and I quote, "This transaction is the tranfer of the dividend amounts due from **** Ltd". 

If my client was a shareholder in **** Ltd, the dividend income wouldn't be subject to Corporation Tax, but what is the implication of it having passed through the LLP from a Corporation Tax point of view?

I really don't even know where to start looking for the answer to this one!  If anyone can point me in the direction of any legislation or guidance I'd be really appreciative.

Thanks

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By Paul Crowley
09th Jul 2021 13:40

Have you got the partnership tax return?
should be all you need if the LLP is prepared by a professional.

But if I understand correctly, the LLP has shares in another Ltd company
The LLP receives the dividend.

People that set this up will know what needs to be done

We do not act for LLPs
I would expect those that do to know.

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Replying to Paul Crowley:
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By Ruth Pringle
09th Jul 2021 14:25

Thanks Paul, I don't have anything other than the partnership statement.

I don't act for any LLP's either, so really only know the very basics of how they work. I could ask the client for a copy of the partnership return if that will resolve the issue, but do you know what will confirm the tax treatment from there? I want to be sure what I'm looking for as don't want to keep going back to him for more and more info, and risk looking increasingly more incompetent!!

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Replying to Ruth Pringle:
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By [email protected]
12th Jul 2021 12:27

Ask for everything you need to get the answers you require
and if what you get brings up more questions ask them too.

If anyone pushes back with "you should know this..." I always push back with "I need to hear it from you..."

In short, the client needs to provide the evedence so that you can advise and produce accounts and comps correctly.

The client will quickly blame you for not asking if they get stung for additional taxes and penalties.
If you have it on record that you've asked and they haven't givent the right info then the onus is on them.

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A Putey FACA
By Arthur Putey
09th Jul 2021 16:19

Your client's Members Agreement might set out the profit share arrangement but otherwise if the members have voted the dividend income to him he ought to be aware of it and it should be reflected in his current account.

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Psycho
By Wilson Philips
12th Jul 2021 09:46

This isn't difficult. LLPs are tax transparent so members are taxed (or not taxed) on their respective share of profits and losses etc as if they had accrued to the members directly.

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