Transfer of a partnership to an LLP

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Owner-Managed Businesses

Guidance

This note explains the general rules that apply on the transfer of a general partnership to an LLP. Both commercial and taxation aspects need to be considered. For guidance on the incorporation of an LLP, see the How to set up an LLP guidance note.

General taxation implications of changing to an LLP

Income tax

Where the transfer of a general partnership to an LLP is undertaken and both the trade and at least one of the partners / members before and after the transfer are the same, it is generally neutral for tax purposes.

The trade of the general partnership is not treated as ceasing and there is no commencement of a new trade within the LLP. Therefore, where the basis period rules applied prior to 2024/25, there was no impact on the members’ notional trade (see the Tax year basis from 2024/25 onwards guidance note) and they continued as if nothing has happened. Following the basis period reforms, the commencement and cessation rules for a partner’s notional

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Jackie Barker

Tax Partner at Wells Associates , Corporate Tax, OMB, Employment Tax, Personal Tax, VAT, IHT Trusts and Estates, Accounting

I have worked in tax since becoming an associate of the CIOT in 2004, having previously qualified as a member of ACCA.As tax partner with Wells Associates I advise on all aspects of direct taxation including personal and corporate planning. We work with a wide range of individuals and owner-managed businesses offering guidance and support at all stages, from assisting with compliance matters through to advising on more complex strategic matters and providing tax efficient solutions.

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