Frequently Asked Questions
What is the current income tax rate for a Limited Liability Partnership (LLP) in the UK?
The tax authorities in the United Kingdom have confirmed that the taxation base of a limited liability partnership will follow the procedure operated in the past for partnerships. The limited liability partnership itself will not be liable for taxation on profits or gains arising within the partnership, but the profits or gains will be assessed to tax separately on the individual partners.
The member’s exemption from UK tax is only applicable provided that no business or trade is carried out with or within the United Kingdom.
What is the current income tax rate for a limited company (Ltd company) in the UK?
A limited company in the UK is subject to the corporate tax rate of 19%. The tax is imposed on the company’s total income, which is a combination of both domestic and foreign earned income.
A limited company in the UK distributes its income to shareholders in the form of dividends. The shareholders will be taxed on their received dividends at the current rates from 7% - 38.1%.
Is there any restriction placed on business activities of a LLP?
Specific categories, which include banking, insurance, financial services, consumer credit related services and employment agencies would need to be licensed by relevant authorities. In addition, a LLP is not able to undertake non-profit making activities.
Does LLPs benefit from Double Tax Treaties (DTTs) in the UK?
The United Kingdom is party to more DTTs than any other sovereign state. However, access to treaty benefits for UK LLPs is determined by the residence of members, consequently International UK LLPs cannot take advantage of UK treaty access.
Does a limited company benefit from Double Tax Treaties (DTTs) in the UK?
Yes, limited companies can be eligible for the UK’s DTTs. The matter of residency will be taken into account to determine whether a limited company is qualified for these DTTs.
What is the minimum number of members of an LLP?
Every limited liability partnership must at all times have at least two, formally appointed designated members. (Designated members are analogous to the executive directors and the company secretary of a company). Moreover, there can be an unlimited number of members. The designated members are responsible for:
- Appointing an auditor (if one is needed)
- Signing the accounts on behalf of the members
- Delivering the accounts to the Registrar
- Notifying the Registrar of any membership changes or changes to the registered office address or name of the limited liability partnership
- Preparing, signing and delivering to the Registrar an Annual Return (Form LLP363); and
- Acting on behalf of the Limited Liability Partnership if it is wound up or dissolved
Designated members are liable in law for failing to carry out these legal responsibilities. If there are fewer than two designated members then every member is deemed to be a designated member. (The limited liability partnership may have decided that all members will be designated members or that only some members will be designated).
With the agreement of the other members, a member may become a designated member at any time. Designated members enjoy the same rights and owe the same duties towards the limited liability partnership as any other member. These mutual rights and duties are governed by the limited liability partnership agreement and the general law. However, the law also places additional responsibilities on designated members.
What is the minimum number of members of a limited company?
A limited company in the UK must include at least 1 shareholder and 1 director. The shareholder(s) has only limited liability. They will not hold any personal liability that goes beyond the capital contributions.
The director(s) will be responsible for the company’s daily operation, accounts, records and compliance requirements. They can hire other professionals, a secretary for example, to assist them.
Is information in relation to company members publicly disclosed?
The information of company members is available to public inspection.
Is there minimum registered capital requirement?
There is no minimum registered capital required and share capital can be in any currency.
What classes of member are permitted?
Partnership agreements, which need not be registered can determine different classes of member interests, thus provide flexibility in partnership structuring.
How to maintain the UK LLP in good standing?
- Maintain partnership structured of at least 2 designated members;
- A local registered office address in the UK;
- Filing annual return and tax return with audited financial statements. Audit exemption is also available if a LLP meets following conditions:
- Annual revenue of less than £10.2 million, asset value of no more than £5.1 million; and
- Employ less than 50 people.
A LLP is not required to hold its annual general meetings.
How to maintain a limited company in good standing?
Generally, a limited company in the UK needs to do the following to maintain in good standing:
- Pay corporate tax
- Maintain a local address and minimum members
- File annual accounts with the Companies House
- File a tax return with the HM Revenue and Customs
- File a confirmation statement (annual return) with the Companies House
- Keep records of the company’s registers, financial and accounting documents.