Scottish Limited Partnership. Service offer

Scottish Limited Partnerships (LPs) are governed by the Limited Partnership Act 1907 and the Partnership Act 1890. Unlike UK LPs, Scottish LPs are regarded as separate legal entities.

A Scottish LP must have at least one general partner and one limited partner. Partners can be individuals or corporate bodies.

The law requires a Scottish LP to be registered (section 5) with the Registrar of Limited Partnerships at Companies House in Edinburg.

A Scottish LP is tax transparent, i.e. pays no tax itself, instead tax on all the profits is paid by the partners in proportion to their holdings in the capital.

If a partner has no income from UK source and the LP does not trade in the United Kingdom, then the partners must only pay tax where they are tax resident.

For example, if the LP has offshore companies as partners and has no withholding tax in the United Kingdom, then, subject to certain conditions, such structure has no tax to pay in the United Kingdom. However, the LP is still required to keep accounting records, record its income and expenses, assess profit and submit tax return (including zero tax return) to the UK tax authorities.

LPs are not normally required to submit accounts to Companies House. For Scottish LPs whose partners are companies registered outside the United Kingdom, accounts are not published at Companies House, but must be made available for inspection by any person, without charge and during business hours at the LP’s principal place of business (with a certified translation in English if the original is in a language other than English). If the principal place of business is outside the United Kingdom, then the accounts must be available:

• at the principal place of business or a head office of any partner who has the principal place of business or a head office in the United Kingdom;
• at an address in the United Kingdom nominated by the partners if none of them has the principal place of business or a head office in the United Kingdom.

Each partner must also make a copy of the LP’s latest accounts available to any person (with translation if the original is in a language other than English).

The UK law requires a partnership to be registered with HM Revenue & Customs (HMRC) for corporation tax. The tax registration should be effected by a specially designated partner. Each partner must also register for personal tax on individuals.

Recently, this procedure has become mandatory for foreign partners as well, but with certain nuances. For partners who are not UK tax residents, there are 2 options:

• obtain a tax number and file annual tax returns (usually zero-rated) with HMRC;
• request the tax office to waive filing annual returns for each partner (if this request is accepted by the tax office, no returns will need to be filed).

A Scottish LP must file a tax return (partnership tax return SA800). Partners who are individuals must include their share in the LP’s profit in their personal tax returns.

The share in profit stated in their returns must coincide with the figures appearing on the LP’s return. The return generally shows profit and loss of every partner.

To fill out the return correctly, partners must ensure appropriate records are kept, including details of all LP’s purchases and sales.

The LP has no obligation to submit an Annual Return to Companies House, though partners must make timely notices of any changes in the structure by filing appropriate forms.

The incorporation of an LP normally takes 4 to 5 weeks.

Ready-made (shelf) partnerships are also available, which reduces the document execution time to 10-12 days (note that time depends on the desired corporate structure and can be longer). At the incorporation, the partners sign a special Partnership Agreement that is filed with Companies House.

The day-to-day management of the LP is carried out by the general partner or a manager he designates. The general partner is also responsible for filing with the UK authorities of tax returns, change of address, changes in partners etc.

The LP incorporation procedure, step by step, is as follows:

1) Selecting:

• company name that should be checked for its uniqueness (the name must include the words “Limited Partnership” );
• partners;
• share capital;
• objects (activities).

2) Payment of services

3) The following documentation must be provided:

• copies of passports for beneficial owners and attorney (if a power of attorney is required),
• if one of the partners is a legal entity, then a full set of constitutive documents is required, including a certificate of good standing (or its equivalent) for companies older than 1 year; the documents must disclose the ownership structure right down to the ultimate beneficial owner.

A contract for administration is also signed with the beneficial owner and a client information form is completed.

4) Drafting and filing constitutive documents with Companies House, preparing the company file.

Upon incorporation, a company file is prepared which includes:

• Certificate of Incorporation
• Partnership Agreement
• Minutes of First Meeting of Members
• Certificates in the name of each Member showing their holdings in the capital
• Power of Attorney (if a nominee manager is appointed)
• Declarations of Trust (if shares in the LP are issued to nominee members).

The client also receives the LP’s seal.

Like companies registered in England, Scottish partnerships are required to file with Companies House information on beneficiaries whose ownership (direct or indirect) exceeds 25% of the partnership's capital. This information is filed in the form of a special register - the PSC Register[1] - and is available to third parties.

[1] PSC - person with significant control. PSC Register - register of persons with significant control.

[2] The cost of services is effective as of the date of sending this offer.

[3] Preparation of financial statements and submission of tax returns may become obligatory in a number of cases. Financial statements can also be prepared voluntarily