Tax And Accounting For Llps

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Slides from our 18 May tax and accounting for LLPs seminar in City Road

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Tax And Accounting For Llps

  1. 1. Tax and Accounting for LLPs Presented by  Vinita Mithani Vinita Mithani 18 May 2011Copyright Arram Berlyn Gardner  2011 m abggroup www.abggroup.co.uk
  2. 2. Today’s objectives d ’ b • Why set up as an LLP, from a legal perspective  • Tax implications of operating through an LLP Tax implications of operating through an LLP • How LLPs can be used as part of a structure to  help mitigate tax h l ii • What do LLP accounts look like and mean?Copyright Arram Berlyn Gardner  2011 m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 2
  3. 3. Why an LLP? A legal perspective • Separate legal entity • Limited liability for members Limited liability for members • Members’ agreementCopyright Arram Berlyn Gardner  2011 m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 3
  4. 4. LLP ‐ the tax implications LLP th t i li ti • Transparent for tax Transparent for tax • Trading profits – less tax efficient than a  company  • No employment tax issues as with a company No employment tax issues as with a company • Capital Gains – more tax efficient than a  company • Sale of business – more tax efficient than a Sale of business  more tax efficient than a Copyright Arram Berlyn Gardner  2011 company m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 4
  5. 5. Taxation in a company vehicle Trading profits/capital gains Trading profits/capital gains £000 Company pre‐tax profits 100 Corporation tax  Corporation tax 20% (20) Post tax profits ‐ paid out as  dividends 80 Income tax on dividends 25% (20) Net income for shareholder 60Copyright Arram Berlyn Gardner  2011 Effective rate of tax 40% m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 5
  6. 6. Taxation in an LLP vehicle Trading profits Trading profits £000 LLP pre‐tax profits 100 Income tax on self‐employed  earnings 40% (40) Class 4 national insurance  contributions  (5) Net income for member Net income for member 55Copyright Arram Berlyn Gardner  2011 Effective rate of tax 45% m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 6
  7. 7. Taxation in an LLP vehicle Capital gains Capital gains £000 LLP pre‐tax profits 100 Capital gains tax on  individuals 28% (28) Net income for member 72Copyright Arram Berlyn Gardner  2011 Effective rate of tax 28% m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 7
  8. 8. A Hybrid Structure A Hybrid Structure Will Kate Pippa Middleton Limited (Corporate member) Windsor LLPCopyright Arram Berlyn Gardner  2011 m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 8
  9. 9. The Hybrid Structure Th H b id St t • Flexible members’ agreement l ibl b ’ • Corporate member – commercial purpose p p p • Trading profits                Corporate Member • Capital gains Individual Members • Joiners and leavers  no employment tax Joiners and leavers – no employment taxCopyright Arram Berlyn Gardner  2011 • Accumulate surplus cash – liquidate company   m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 9
  10. 10. LLP accounts • S b i i Submission of annual formal statutory accounts to Companies  f lf l t t t t t C i House q • Audit requirements • Members’ capital: equity ‐v‐ debt • Equity  – C i ld i Capital designated as equity d i – Unallocated profits – Revaluation reserve Revaluation reserve • Debt – Capital not designated as equity – Profits allocated Copyright Arram Berlyn Gardner  2011 – Profits automatically divided per members’ agreement m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 10
  11. 11. Vinita Mithani Arram Berlyn Gardner 30 City Road London EC1Y 2AB 020 7330 0049  020 7330 0049 gg p vmithani@abggroup.co.ukCopyright Arram Berlyn Gardner  2011 or Google me! m abggroup Tax and Accounting for LLPS www.abggroup.co.uk 11

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