We have different guides for different business combinations. This page provides links.

Popular business combinations which have been used in the UK include:

  • A company plus service Limited Liability Partnership (LLP).
  • An LLP plus a service company.
  • An LLP with corporate partners.

If a company is paying a combination of tax at marginal rates of Corporation Tax and also incurring Employers National Insurance on salaries and bonuses, it may be time to consider the advantages of setting up an LLP.

Conversely, where partners are paying higher rate tax, a company run alongside an existing LLP is useful as a 'money box' and can shelter partners from top rates of tax.

A further combination is combining a corporate partner(s) with an LLP.

There are numerous advantages of using an LLP/company or company/LLP combination. This makes it extremely flexible but there are also substantial pitfalls. Which structure is right for the client depends on the individual circumstances.

There has been a recent focus on combating tax avoidance achieved using these structures and the 2014 Finance Act saw the introduction of a number of changes to partnerships and how profits are taxed. This has lead to a decrease in popularity of these structures and in some cases an unwinding of the structure. These structures can still be efficient and will work in the right circumstances but come with a health warning and a detailed review of the application of the various anti-avoidance rules is advised before entering into such a structure.

Planning guides

These summarise the key issues for advisers, show how to get started and consider the advantages. They pull together case law to illustrate some of the potential pitfalls for tax including loans, benefits and associated companies and company law.

Partnerships: Unlimited or limited?
An introduction to partnerships.

Will I pay less tax if I trade in partnership?
Will I pay less tax if I trade via a partnership or a LLP compared to if I trade via a company or as a sole trader?

Running an LLP in tandem with a company
Businesses may operate using a variety of different structures. When Income Tax rates are high it may be desirable to shelter profits in a company. A partnership/LLP is also an attractive vehicle because it can be more flexible for its owners as they are taxed transparently.

Partnerships: Losses
How are losses treated for partnerships? What loss reliefs are available to partners and what restrictions are there?

Specific anti-avoidance rules

Mixed members: Partnerships with company members
The partnership mixed member rules are anti-avoidance provisions that aim to prevent individual partners allocating profits from themselves via corporate structures.

Salaried members: When is a partner taxed as an employee?
This guide looks at when a partner may be taxed under PAYE. 

Transfer of assets and income streams through partnerships
The transfer of assets and income streams through partnerships rules impose an Income Tax charge, in order to counter tax avoidance, when assets or income streams are transferred through or by different members of partnerships, including LLPs, in order to take advantage of their different tax attributes.

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