How do the loans to participator rules interact with Limited Liability Partnerships (LLPs)?
This is a freeview 'At a glance' guide to LLPs and the loans to participator rules.
At a glance
A Limited Liability Partnership (LLP) may be formed of individual members and corporate members, or it may work in close contact with a service company.
When a Close company makes a loan to an LLP and where an individual member of the LLP is also a participator in the close company a Corporation Tax charge may apply.
The s.455 CTA 2010 'loans to participators' tax charge will apply if a close company makes a loan or advance to an LLP where one or more of the members is:
- A participator in the company, or
- An associate of an individual who is such a participator, and
- The loan is still outstanding nine months from the year-end of the relevant accounting period of the company.
This is an issue that may inadventently pop up when a LLP and close company are run in tandem and there are shared services and re-charges or if a benefit is in some way confered on the participator via the structure.
The s455 loan to participator charge may also arise when a partnership or sole trader is run in tandem with a company.
Useful guides on this topic
Close company loans toolkit (loans to participators)
This guide takes a detailed look at the Corporation Tax treatment when a close company makes a loan to a participator (director-shareholder). It also provides links to our guides for individuals on the making of loans to companies.
Close companies: Definitions & control
What is a Close company? What are the tax consequences? What is a Participator? What is meant by Control of a company? What are the tests for Control?
Running an LLP in tandem with a company
It is possible to run a Limited Liability Partnership (LLP) or other form of partnership in tandem with a company. Partnerships can also have corporate partners. What needs to be considered?