The UK is generally not considered to be a tax haven in any way. However, when structured in the right way for the right people a UK LLP can provide an intriguing opportunity for non-UK residents to mitigate their tax.
UK LLPs are a hybrid vehicle being a corporate body for legal purposes and a partnership for tax purposes. This gives it the unique advantage of offering the advantages of a UK registered entity with limited liability, which not being taxed in it’s own right.
Partnerships (including LLPs) are transparent for tax purposes, with the underlying partners being subject to personal tax on their profit share. However, for UK non tax residents they are only liable for tax on UK source income.
This means if the partners are not UK tax resident and the income is not UK sourced then there is no income in the UK. This also means that if your current tax jurisdiction does not tax foreign income it may well be completely tax free.
Establishing a UK Limited Liability Partnership (LLP) for non-residents with non-UK income can provide several tax benefits, making it an attractive option for international business. Here are the key advantages:
- Pass-Through Taxation:
- An LLP is not taxed as an entity. Instead, the profits and losses are passed through to the individual partners.
- Non-resident partners are only subject to UK tax on UK-sourced income. Therefore, non-UK income is generally not subject to UK taxation.
- No Corporation Tax:
- Unlike limited companies, LLPs are not subject to UK corporation tax. Partners report their share of the LLP’s profits on their personal tax returns.
- Flexibility in Profit Distribution:
- LLPs offer flexibility in how profits are distributed among partners. This can be tailored to optimize individual tax situations.
- No Capital Gains Tax on Non-UK Assets:
- Non-resident partners are not liable for UK capital gains tax on the disposal of non-UK assets. This is beneficial for investments and assets held outside the UK.
- Reduced Administrative Burden:
- While LLPs must file annual accounts and a confirmation statement with Companies House, the overall administrative burden is often less compared to other business structures, especially for non-residents.
- International Recognition and Credibility:
- A UK LLP provides a reputable business structure that is recognized globally. This can enhance credibility and business opportunities.
- Limited Liability Protection:
- Partners in an LLP enjoy limited liability, protecting their personal assets from business debts and liabilities, similar to shareholders in a corporation.
- Double Taxation Agreements:
- The UK has an extensive network of double taxation agreements (DTAs) with other countries. These DTAs can help prevent double taxation of income for non-resident partners, depending on their country of residence.
Key Considerations
- Local Taxation: Non-resident partners must consider their own country’s tax regulations. Income received from the LLP may still be subject to local taxes.
- Permanent Establishment Risk: If the LLP is deemed to have a permanent establishment in another country, this could result in tax liabilities in that jurisdiction.
- Compliance Requirements: While the administrative burden may be reduced, LLPs still have compliance requirements, such as maintaining proper records and submitting accounts and tax returns.
We can assist with the formation and management of UK LLPs, including accounting, tax returns and ongoing advice.
Contact us on info@fusionpartners.co.uk to find out more.