How are LLPs taxed

[gerrysmithfield]

Consider the following situation:

- A UK LLP is used to hold shares in a foreign private company
- Its sole purpose is to hold these shares for the Partners, it has no other trading or activities
- The partners obviously wish to realise capital gains tax and not income tax once the investment is sold

What are the considerations that the Partners would need to make in order to achieve CGT? E.g. Is there a risk HMRC would consider share trading to be a revenue stream and therefore taxed as income?

[pawncob]

If it walks like a duck ...............

It's an investment company.

[bd6759]

It's an investment company.

It's an LLP.

[AnthonyR]

LLPs are transparent vehicles, so although you need to file returns any income or gains is taxed directly on the members themselves in the appropriate shares.

This means that if the LLP is buying and selling regularly in a way that would be seen to be trading then it's likely to be trading income. If it is buying and holding for investment gain then it's likely CGT.

Just be aware that there are IHT issues around LLPs, especially if the companies are non-listed and would otherwise qualify for BPR or alternatively if the clients are non-domiciled.