3252.This section contains the rules that treat limited liability partnerships (“LLPs”) in the same way for tax purposes as ordinary partnerships (“firms” in this Act). It is based on section 118ZA of ICTA.
3253.The Limited Partnerships Act 1907 established “limited partnership”. It built on the Partnership Act 1890 and established a class of partner whose liability for the debts of the firm did not extend beyond the partner’s contribution to the firm. But there had also to be at least one general partner whose liability was not so limited and the firm was not a separate legal person.
3254.The Limited Liability Partnerships Act 2000 created a new form of legal entity, a limited liability partnership. It is a body corporate with legal personality separate from its members. In many ways, LLPs are treated for non-tax purposes in the same way as companies. In particular, there are requirements as to accounts and audit. Members of an LLP may be subject to disqualification in the same way as directors. And various provisions relating to insolvency and winding up apply to LLPs as they do to companies.
3255.A first version of section 118ZA of ICTA was inserted by the Limited Liability Partnerships Act 2000. FA 2001 replaced it with a new section. Those Acts also introduced special rules (which are not in this Act) for:
losses;
capital gains;
relief for interest; and
some types of investment vehicle.
3256.Subsection (3) ensures that the basic rule in subsection (1) continues to apply to an LLP if the LLP would otherwise temporarily fail to qualify for treatment as an ordinary firm on account of the LLP:
ceasing to carry on a trade with a view to profit; or
being wound up.