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English limited partnership (LP)

English LPs are an effective tool for tax planning, allowing to conduct international commerce, in fact, in a tax-free regime (if the partners are not residents of the UK and the partnership has no domestic activities). English partnerships became especially popular in 2017, when the Law obliged all Scottish partnerships with limited liability LP, in which all partners are legal entities, to submit information about controllers (beneficiaries) to the Register of Companies.

English LPs have identical legal form and similar advantages. At the moment, the main advantage of this type of partnership is that they do not fall and they will not fall within the scope of legislative acts on disclosure of information on controlling persons (beneficiaries).

LPs registered in England are regulated by the Limited Partnership Act 1907. Like “regular” companies, this form of LP is subject to state registration in the Register of Companies and the Tax Inspectorate. Despite this, for historical reasons, these partnerships are not considered separate legal entities.

This means that the owners of their property are not legally the partnerships themselves, but their general partners. But this does not prevent the partnership from acting and acting as an individual - the partnership has an Incorporation Certificate with the specified company registration number, as well as a separate tax number.

Our practical experience has proved that English LPs are a good alternative to the Scottish LP, which allow to preserve confidentiality, as well as they are an effective tool of tax planning.

ENGLAND - LP - SHORT VERSION

Features
  • Fast and easy registration
  • Low cost of registration/purchase and annual maintenance
  • Need for state registration in the Companies House, like “ordinary” companies
  • Limited liability of partners for debts and liabilities of the enterprise only within the amount agreed in advance between the partners
  • Possibility of not taxing in the absence of commercial activities in the UK (for the same reason, the company can not obtain the status of a UK tax resident)
  • Impossibility for a partnership consisting of non-resident members to obtain a certificate of the status of a tax resident of England (Great Britain) and benefit from UK treaties on avoidance of double taxation
  • Not subjecting to legislative acts on disclosure of information on controlling persons (beneficiaries)
  • Absence of the need to maintain and submit financial statements (LP does not pass audits and does not require additional costs for accounting)
  • Opportunity to conduct trading activities with both European countries and with Great Britain
  • Automatic assignment of the UTR (Partnership Unique Taxpayer Reference) tax number when registering a partnership
  • Automatic assignment of the UTR (Partnership Unique Taxpayer Reference) tax number when registering a partnership
  • Possibility to get VAT and EORI numbers
Requirements for the establishment
  • There must be at least two partners (members), one of which is appointed by the managing partner, and the second one becomes a limited partner. Partner is a natural person or a legal entity, there are no requirements for residency.
  • Partners can be nominees.
  • Partners and a beneficiary must provide ID cards with photo and proof of permanent residence. Legal entities provide documents confirming their registration and structure.
  • Authorized capital is a contribution of partners, which is distributed between them and is not paid at registration.
  • The partnership must have a legal address in England.
Timing
  • Ready-made LP companies are available.
  • The registration of a new partnership is offered under the same conditions, it will take 5-10 working days.

ENGLAND - LP - FULL VERSION

Documents required for opening of the partnership

If a legal entity acts as a founder, an extract from the register of the country of registration, registration documents of the legal entity, as well as documents confirming its structure will be required.

Partners and the beneficiary are required the copies of the passports and confirmation of the permanent place of residence, as well as a questionnaire in which the customer indicates his wishes for the structure of the company.

As a confirmation of the place of permanent residence, the citizens of Russia, Ukraine and Belarus can provide a copy of the internal national passport: a copy of the first spread + a copy of the second spread + a copy of the page with the stamp on the residence permit. Or a recent utility bill where the name and address are visible.

Name

The name of English limited partnership should end with the abbreviation “LP”.

When registering a company of any type in the UK, the name restrictions are relatively numerous - the company can not be registered in the UK without special permission which name has the words “Bank”, “Insurance”, “Trust”, “Assurance”, “Building Society”, “England”, “European”, “British”, “Irish”, “Royal”, “King”, “Queen”, “Duke”, and others. The use of the words “National’, “International”, “Holding”, “Group”, etc. is limited.

Structure

There are no shareholders, directors or secretaries in the partnership structure. It is created by two parties: one managing partner with unlimited liability and one or more partners with limited liability

Natural persons of any citizenship and residency can be partners, as well as legal entities registered in any country in the world. The shares of the partnership are distributed among the partners in similar (equal) shares. Functions of the director are usually performed by the general partner.

The founders have the right to appoint managers who will manage the affairs of the partnership on behalf of and on the instruction of the LP partners. Only natural persons can be managers (attorneys).

Local address

Local registration address is necessary. This should be the actual address (business address) in England, and not PO box, etc.

All official messages, for example, letters from the state register, Companies House, will be sent on the legal address. This must be a physical address in England. You can use the PO Box, but you still need to include a physical address and zip code.

Nominee services

Nominee partners will formally appear in all the main registration documents of the partnership, a general power of attorney for the right to manage the partnership will be issued to the owner (or to the person indicated by him).

In addition, a trust declaration will be drawn up between the nominee partners and the owner (representative), which confirms that the nominee partner owns a stake in the partnership in favor of the owner and he has no right to take any actions with them without the consent of the last one.

Authorized capital and shares

Payment of any capital is not required at the establishment.

There is no authorized capital in structure of LP; the funds invested by the partners are used (the size of the investments is determined by the partners themselves).

The register of beneficiaries (controllers - person with significant control (PSC))

English LPs are not required to disclose persons with significant control ie. beneficiaries.

Taxation

The partnership with limited liability is not subject to taxation in the UK. The profit of the partnership is distributed among the partners of the company, who must pay the tax at the place of their tax residence.

Legal entities and natural persons who are residents in tax-free jurisdictions, as a rule, act the partners of LP which allows to avoid taxation in the UK completely.

LP is not a corporate taxpayer in the UK. In case if the partnership has foreign participants and the company does not carry out activities in the UK, there is no taxation on its territory, and participants must independently fulfill their tax obligations in the country of registration. If partners are offshore companies, they are exempt from taxes if they do not operate in the territory where they are registered. According to the English law, owners and managers in such partnership do not bear personal responsibility for its debts and liabilities. Thus, a tax-free company with an “English face” is created.

This form of LP is subject to state registration in the Register of Companies and Tax Inspection and receives a tax number.

LP, consisting of non-resident members, will not be able to obtain a certificate of the status of a UK tax resident and benefit from UK treaties on avoidance of double taxation.

In order to obtain a VAT number, it is necessary to document that the company’s taxable turnover exceeds or will soon exceed £ 85,000 (this is the registration threshold in 2017). For voluntary VAT registration, the registration authority requests additional information: the type of activity, contact details of the company and business partners in Europe.

Each company registered in the VAT system must submit quarterly reports to the UK tax authorities - HMRC. If several accounting periods in a row the English company submits zero reports, then it is possible it will be excluded from the VAT payer register and its number will be canceled.

Value added tax (VAT) is levied in Britain at the rate of 20% (2017). When trading with partners from EU countries, which also have a VAT number, the tax rate is 0%.

LPs that do not conduct business in the UK and whose members are outside the country are required to file a zero tax return.

There is an opportunity to receive EORI (Economic Operator Registration and Identification) - a unique identification number assigned to foreign trade entrepreneurs when registering with the Business Registration and Identification System. It is used to identify entrepreneurs and other persons when communicating with customs authorities.

Reporting

Unlike other British legal forms such as LTD and Limited Liability Partnership (LLP), the LP is not required to submit financial statements to public authorities.

LPs that do not conduct business in the UK and whose members are outside the country are required to file a zero tax return.

In case of registration as a payer of value-added tax, VAT returns are usually submitted once a quarter.

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