Scotland is a country occupying one third of the island of the United Kingdom. It has a population of over 5.2 million and Glasgow is the largest city.
Scottish Limited Partnerships (SLPs) are governed by the Limited Partnership Act 1907.
The main advantages of a SLP include:
- Tax transparency: This means the SLP is taxed as though it did not have a separate legal personality. No tax is payable by the SLP itself, instead, the UK tax authorities will look to the respective partners for the purposes of assessing liability to UK tax. In a typical SLP structure, the limited partner will be a Scottish registered Company only receiving a small percentage (e.g. 1%) of profit / gains. The general partner would receive the remaining percentage of profits / gains and provided they are non-resident of the UK and the SLP does not trade in the UK, the general partner would not be subject to UK taxation.
- Separate legal personality: SLPs have a separate legal personality which means the SLP can own its assets, enter into contracts, own property directly (rather than through the General Partner), borrow money and grant certain types of security.
The 6 Essential Facts
To establish an SLP, Form LP5 must be filed with the Registrar of Limited Partnerships at Companies House in Edinburgh.
The LP is not required to maintain a registered address, rather a principal place of business, situated in Scotland.
2. Partner Requirements
There must be at least two partners in a SLP at all times. It must have at least one general partner and one limited partner.
3. Partner Restrictions
Any person or corporate body can be a partner and there are no restrictions on nationality or residence.
4. Partner Liabilities
The general partner is responsible for the SLP’s business and in this capacity, is responsible for all debts and liabilities of the SLP.
The limited partner acts in a ‘passive investment’ capacity. Their liability is limited to their capital contribution to the SLP, provided they do not participate in the day-to-day management of the SLP.
5. Partnership Agreement
Although not a legal requirement, it is recommended that a private written partnership agreement is entered into between the general and limited partners. Such an agreement would typically include reference to the nature of business, partner’s contributions, the allocation of profits, administration of the SLP and dissolution arrangements.
- All SLP’s are required to keep records of its financial transactions in sufficient detail to enable the financial position of the LP to be determined at any time.
- Such accounts are not required to be publicly filed with Companies House.
- An SLP is required to file an annual Partnership Tax Return and accompanying accounting schedules with the UK Revenue showing each partner’s share of the profits or losses, irrespective of whether or not the partners are subject to UK taxation on the same.