The UK LLP (Limited Liability Partnership) is a partnership structure, available in parts of the UK, that can be run tax-free in the UK when certain conditions are met, such as being operated from outside of the UK by non-UK residents. In this guide, I provide an overview and detail how registration, maintenance, taxation and banking works.
The United Kingdom is, as its name implies, a union. It has four constituent nations: England, Scotland, Wales and Northern Ireland. England and Wales are the subject of our focus today, and more specifically their shared LLP structure. Just to clarify, England and Wales share the same business registry while Scotland and Northern Ireland operate their own separate registry.
The UK LLP is a partnership structure. This means that it must have at least two partners (all LLP partners are limited partners, unlike an LP with its mix of limited and general partners). The partners can be natural persons, legal entities or a mix of both. There are no residency requirements for any of the partners.
A UK LLP can conduct business in the UK without any restrictions. With that said, doing so will usually create a tax burden in the UK for the partners. Do note that selling services and products to UK customers from abroad, via a UK LLP, will not usually be deemed as conducting business in the UK and as such, will not usually create a UK tax liability. It may create a UK VAT liability, however, depending on the nature of the products and services sold. See my UK VAT guide for more details.
This brings us to the next point, taxation. A UK LLP is a pass-through entity for tax purposes and this means that it is not a taxable entity in and of itself. Instead, the partners (owners) must include their share of the profits on their own tax returns, in their country of residence (personal or corporate). When one or more of the partners is a UK resident, they will be liable to tax in the UK on their share of the LLP’s worldwide profits while non-resident partners will only be liable to tax in the UK on their share of the LLP’s UK profits. If no business is conducted in UK, and all partners are non-residents, no tax liability will exist in UK but it is important to keep in mind that unlike with the similar BC LLP structure in Canada, a number of returns will still have to be filed in the UK every year, with both HMRC and Companies House (the business registry).
To better illustrate how this works in practice, here are a few examples:
UK LLP + UK resident owners
John owns 20% of Jolly Ice Cream LLP, a business involved in the distribution of ice cream to convenience shops in the Leeds area. Jolly Ice Cream LLP generated a profit of 1000000 GBP during the previous fiscal year. Because John owns 20% of the business, he is responsible for 20% of the profits. John must thus add 200000 GBP on his self assessment return for that fiscal year. It does not matter if John actually received 200000 GBP from the business.
UK LLP + non-resident owners
Jerry owns 50% of Anna’s Bakery LLP, a business involved in the transport of uranium yellowcake. Jerry is a tax resident of the UAE. The business has only one other owner, Felix, who is a tax resident of the Cayman Islands. Because all of Anna’s Bakery LLP owners are non-residents and because the business has no UK operations, none of its profits are UK-sourced. This means that while Anna’s Bakery LLP is a UK business, with all the benefits and the reputation advantage this entails, it, Jerry and Felix have no UK tax liability whatsoever.
The above covers the UK side. Depending on your circumstances, you may have a tax liability in your country of residence. I recommend reading my place of management rules and CFC rules guides for more details on how international taxation works in the context of legal entities operating outside of their country of registration. I also recommend that you read my explainer on foreign sourced income to ensure you fully understand this concept.
It is currently not possible to self-register a UK LLP online (as of 2022). You must either go through a registration service, use an authorized commercial software or file the registration form via the post.
In most cases, it takes no more than 24-48 hours for Companies House to approve an application once received and the LLP can be used immediately after approval.
A UK LLP can engage in any lawful business activities (do note that some activities may require regulation, that is especially the case in the financial and pharma industries). This includes selling on platforms such as Amazon FBA and Shopify, both of which accept the structure (I often get asked about those two).
Maintenance and Taxation
HMRC requires that all LLPs file a partnership return (SA800) every year before the end of October (January if filing electronically), for the fiscal year ended in April, even when there are no business activities. Non-compliance will result in the issuance of penalties, for both the LLP and the partners. HMRC also requires that each partner register for an individual UTR (UK tax ID) and file self assessment returns (SA100 + applicable schedules), every year before the end of October (January if filing electronically), for the fiscal year ended in April.
Companies House requires that all LLPs file annual accounts, every year (as the name implies), in the nine months following the registration anniversary. Companies House also requires that all LLPs file a confirmation statement and pay an annual renewal fee. Non-compliance will result in the LLP being struck off.
A UK LLP must also maintain a registered address in England or Wales, at all times, and the address must be equipped to handle the delivery of official notices. The registered address cannot be located in Scotland, Northern Ireland or abroad.
While the UK is home to some of the largest banks in the world (HSBC, Standard Chartered etc), non-residents will often struggle to open accounts for their LLP. As a result, it is recommended to instead use fintech services such as Wise, Revolut, Juni etc. They offer an excellent range of services, in multiple currencies, and are compatible with Stripe, PayPal etc.
Speaking of which, a UK LLP can apply for a merchant account with most of the major payment processing services operating in the UK. The best one, for businesses operating primarily in currencies other than the GBP, is Stripe (settlements can be received in EUR, USD, CHF etc). PayPal can also be used and can be linked to Wise and similar fintech services, but only in GBP.
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