Tax transparency of general and limited liability partnerships

It is a truth universally acknowledged that partnerships and limited liability partnerships (LLPs) are transparent for tax purposes. But what exactly this statement means in practice and how widely it should apply is not always entirely clear. If we examine how partnerships and LLPs are treated in a range of tax areas we can see that although the idea of ‘transparency’ is very useful it is not always the whole story.

Background

In English law a general partnership is not a separate legal person. It is rather the relation between persons carrying on a business in common with a view to profit (Partnership Act 1890 s 1). On this basis ‘partnership property’ is held by one or more of the partners on behalf of the partnership and a ‘partnership interest’ is really a bundle of rights...