LLP QUESTION

Taxation of partners

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A question regarding LLP. A client who was originally a sole trader converted his business earlier this year to an LLP and he and his son will be the only two partners in the LLP.  They do building work/ house maintenance. My question is can they be taxed as partners as percentage of profits or do they have to be treated as employees and go on a payroll?

 

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By Paul Crowley
10th Nov 2021 13:15

We do not act for LLPs
Having seen other LLP accounts prepared locally not one set followed accounting rules.
But then HMRC and companies house do not really care
Asking this question suggests that this is not an area you are comfortable with
I assume you did not get involved with the decision made by the potential clients
I would have gone to company everytime

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Replying to Paul Crowley:
RLI
By lionofludesch
10th Nov 2021 14:34

I never liked LLPs either.

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Replying to lionofludesch:
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By Paul Crowley
10th Nov 2021 16:43

Not exactly a choice
We did deal with one that got pushed my way to check compliance, after the accounts were done and needed a lot of disclosures and ammendments.
They are not a simple partnership with limited liability
Anyone who asked was advised about companies and always ended up with a company.
But fees would always be higher than a company or partnership of same size if done properly.

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Replying to Paul Crowley:
paddle steamer
By DJKL
16th Nov 2021 12:39

I like them, they can be flexible.

Then again all our ones had accounts/tax done in house and whilst I should probably not say this I never really cared if the accounts I produced were not 100% compliant re disclosures etc, as long as the reported profits were correct that was good enough for me. (Still have one last one, an LLP re a new build property play overage that is really slow turning itself into cash, circa 15 years now since we first acquired the sites)

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Replying to Paul Crowley:
By jon_griffey
16th Nov 2021 12:03

Paul Crowley wrote:

We do not act for LLPs

Get used to LLP's. With the rate of CT increasing to 25%, LLP's are going to become more appealing than companies for many clients.

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By Tax Dragon
10th Nov 2021 14:41

"Converted... will be..."

Who are the partners at present?

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By AndyC555
10th Nov 2021 14:43

"can they be taxed as partners as percentage of profits or do they have to be treated as employees and go on a payroll?"

Dunno.

Do conditions A, B and C as set out in ITTOIA 2005 sections 863B to 863D apply?

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Northumberland flag
By MJShone
10th Nov 2021 15:13

From a tax point of view LLPs are, for most purposes, treated the same as partnerships so unless the partners fall foul of the salaried members rules (as pointed out by AndyC555), treat the partners as you would partners in a non-LLP partnership. The main differences between LLPs and general partnerships come at the beginning and the end of the life of the LLP.
As others have pointed out, there are specific rules about the format etc of the accounts of LLPs.

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By girlofwight
10th Nov 2021 17:41

With exceptions around salaried partners, which are unlikely to apply with a business this size, they will both be treated as Self Employed.

My understanding, but check, is that for the father his basis periods will roll on from Self Assessment. The son will have a new set of basis periods pre supposing he wasn't a sole trader before.

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