10 Income tax and chargeable gains.U.K.
(1)In the M1Income and Corporation Taxes Act 1988, after section 118 insert—
“ Limited liability partnershipsU.K.
118ZA Treatment of limited liability partnerships.
For the purposes of the Tax Acts, a trade, profession or business carried on by a limited liability partnership with a view to profit shall be treated as carried on in partnership by its members (and not by the limited liability partnership as such); and, accordingly, the property of the limited liability partnership shall be treated for those purposes as partnership property.
118ZB Restriction on relief.
Sections 117 and 118 have effect in relation to a member of a limited liability partnership as in relation to a limited partner, but subject to sections 118ZC and 118ZD.
118ZC Member’s contribution to trade.
(1)Subsection (3) of section 117 does not have effect in relation to a member of a limited liability partnership.
(2)But, for the purposes of that section and section 118, such a member’s contribution to a trade at any time (“the relevant time”) is the greater of—
(a)the amount subscribed by him, and
(b)the amount of his liability on a winding up.
(3)The amount subscribed by a member of a limited liability partnership is the amount which he has contributed to the limited liability partnership as capital, less so much of that amount (if any) as—
(a)he has previously, directly or indirectly, drawn out or received back,
(b)he so draws out or receives back during the period of five years beginning with the relevant time,
(c)he is or may be entitled so to draw out or receive back at any time when he is a member of the limited liability partnership, or
(d)he is or may be entitled to require another person to reimburse to him.
(4)The amount of the liability of a member of a limited liability partnership on a winding up is the amount which—
(a)he is liable to contribute to the assets of the limited liability partnership in the event of its being wound up, and
(b)he remains liable so to contribute for the period of at least five years beginning with the relevant time (or until it is wound up, if that happens before the end of that period).
118ZD Carry forward of unrelieved losses.
(1)Where amounts relating to a trade carried on by a member of a limited liability partnership are, in any one or more chargeable periods, prevented from being given or allowed by section 117 or 118 as it applies otherwise than by virtue of this section (his “total unrelieved loss”), subsection (2) applies in each subsequent chargeable period in which—
(a)he carries on the trade as a member of the limited liability partnership, and
(b)any of his total unrelieved loss remains outstanding.
(2)Sections 380, 381, 393A(1) and 403 (and sections 117 and 118 as they apply in relation to those sections) shall have effect in the subsequent chargeable period as if—
(a)any loss sustained or incurred by the member in the trade in that chargeable period were increased by an amount equal to so much of his total unrelieved loss as remains outstanding in that period, or
(b)(if no loss is so sustained or incurred) a loss of that amount were so sustained or incurred.
(3)To ascertain whether any (and, if so, how much) of a member’s total unrelieved loss remains outstanding in the subsequent chargeable period, deduct from the amount of his total unrelieved loss the aggregate of—
(a)any relief given under any provision of the Tax Acts (otherwise than as a result of subsection (2)) in respect of his total unrelieved loss in that or any previous chargeable period, and
(b)any amount given or allowed in respect of his total unrelieved loss as a result of subsection (2) in any previous chargeable period (or which would have been so given or allowed had a claim been made).”
(2)In section 362(2)(a) of that Act (loan to buy into partnership), after “partner” insert “ in a limited partnership registered under the M2Limited Partnerships Act 1907 ”.
(3)In the M3Taxation of Chargeable Gains Act 1992, after section 59 insert—
“59A Limited liability partnerships.
(1)Where a limited liability partnership carries on a trade or business with a view to profit—
(a)assets held by the limited liability partnership shall be treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and
(b)any dealings by the limited liability partnership shall be treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such),
and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.
(2)Where subsection (1) ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged—
(a)on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and
(b)on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,
it shall be assessed and charged on the limited liability partnership as if subsection (1) had never applied in relation to it.
(3)Neither the commencement of the application of subsection (1) nor the cessation of its application in relation to a limited liability partnership is to be taken as giving rise to the disposal of any assets by it or any of its members.”
(4)After section 156 of that Act insert—
“156A Cessation of trade by limited liability partnership.
(1)Where, immediately before the time of cessation of trade, a member of a limited liability partnership holds an asset, or an interest in an asset, acquired by him for a consideration treated as reduced under section 152 or 153, he shall be treated as if a chargeable gain equal to the amount of the reduction accrued to him immediately before that time.
(2)Where, as a result of section 154(2), a chargeable gain on the disposal of an asset, or an interest in an asset, by a member of a limited liability partnership has not accrued before the time of cessation of trade, the member shall be treated as if the chargeable gain accrued immediately before that time.
(3)In this section “the time of cessation of trade”, in relation to a limited liability partnership, means the time when section 59A(1) ceases to apply in relation to the limited liability partnership.”