UK LLP filed dormant accounts but had non-UK trading activity — how to regularise?

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Rafikus

Rafikus

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  • #1
    Hello,

    I am looking for practical guidance regarding a UK LLP.

    The LLP was incorporated in 2020. All members are non-UK residents. The LLP is managed and controlled from outside the UK. It has no UK office, no UK employees, no UK stock, no UK property and no UK-resident members.

    The business activity is online retail. Customers are outside the UK, mainly in France, and suppliers are also outside the UK, mainly China. Payments were processed through online payment providers.

    For HMRC, the LLP was previously treated as dormant / no Partnership Tax Return required for an initial 3-year period because there was no UK source income and the LLP was managed and controlled outside the UK.

    However, I now realise that for Companies House purposes, dormant LLP accounts may not have been correct, because the LLP did have business transactions, even if they were all outside the UK.

    Dormant LLP accounts were filed with Companies House in previous years.

    My questions are:

    1. Is this mainly a Companies House accounts issue rather than a UK tax issue?
    2. Should I file amended LLP accounts for the years where dormant accounts were filed but non-UK trading transactions occurred?
    3. If there is no UK source income, do the Companies House accounts still need to show the non-UK trading activity?
    4. Should I speak to a UK accountant who specialises in LLPs and non-resident members?
    5. What is the safest practical way to regularise this without creating unnecessary tax issues?
    I am not looking for personal tax advice on the forum, just trying to understand the correct route before speaking to an accountant.

    Thank you.
     
    Paul Kelly ICHYB

    Paul Kelly ICHYB

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  • #2
    Yeh, advice is probably a good idea.

    If you traded, the LLP had turnover and profit. Personal/partnership tax will need to be paid on that, as individuals (I guess), regardless of the fact that sales were not in the UK.
     
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    Rafikus

    Rafikus

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  • #3
    Paul Kelly ICHYB said:
    Yeh, advice is probably a good idea.

    If you traded, the LLP had turnover and profit. Personal/partnership tax will need to be paid on that, as individuals (I guess), regardless of the fact that sales were not in the UK.
    Click to expand...
    Thanks, I agree that professional advice is needed.

    Just to clarify the point I am trying to understand: all LLP members are non-UK resident, the LLP is managed and controlled outside the UK, and there are no UK operations, no UK office, no UK employees, no UK stock, no UK assets and no UK customers.

    My understanding from HMRC HS380 is that where a partnership consists solely of non-resident partners, the Partnership Tax Return should only show profits from UK operations. HMRC PM287000 also says HMRC may agree that a Partnership Return is not required where there are no UK resident partners, no UK income or gains, and the partnership is managed and controlled outside the UK.

    So I understand that the Companies House accounts issue is separate: dormant accounts may have been wrong because there were trading transactions.

    But on the tax side, are you saying that non-UK trading profits of a UK LLP with only non-resident members are still taxable in the UK, even where there are no UK operations or UK-source profits?

    I am trying to separate:

    1. Companies House accounting correction issue; and
    2. HMRC / UK tax liability issue for non-resident partners with no UK-source income.
    Thanks.
     
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    Paul Kelly ICHYB

    Paul Kelly ICHYB

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  • #4
    What was the purpose of the UK LLP?

    Rafikus said:
    Payments were processed through online payment providers.
    Click to expand...
    Where/who were they registered to?
     
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    Rafikus

    Rafikus

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  • #5
    Paul Kelly ICHYB said:
    What was the purpose of the UK LLP?


    Where/who were they registered to?
    Click to expand...
    The purpose of the UK LLP was to operate an online retail / dropshipping business for non-UK markets, mainly France / Europe, using a UK legal entity for contracts, payment processing and supplier/customer operations.

    The LLP was not intended to have UK operations. It had no UK office, no UK employees, no UK stock, no UK customers, no UK property and no UK-resident members. The business was managed and controlled from outside the UK.

    The payment provider accounts were opened in the name of the UK LLP. Payments from customers were processed through online payment providers, and suppliers were paid from the LLP business account/payment setup.

    I now understand that this likely means the LLP was not dormant for Companies House purposes, because there were trading transactions, even if the trading was outside the UK.

    So my main question is about the correct way to regularise the Companies House accounts: should amended LLP accounts be filed for the years where dormant accounts were filed, while separately confirming with HMRC whether there is any UK tax/Partnership Tax Return requirement given there was no UK-source income and all members were non-UK resident?
     
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    Newchodge

    Newchodge

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  • #6
    Rafikus said:
    Thanks, I agree that professional advice is needed.

    Just to clarify the point I am trying to understand: all LLP members are non-UK resident, the LLP is managed and controlled outside the UK, and there are no UK operations, no UK office, no UK employees, no UK stock, no UK assets and no UK customers.

    My understanding from HMRC HS380 is that where a partnership consists solely of non-resident partners, the Partnership Tax Return should only show profits from UK operations. HMRC PM287000 also says HMRC may agree that a Partnership Return is not required where there are no UK resident partners, no UK income or gains, and the partnership is managed and controlled outside the UK.

    So I understand that the Companies House accounts issue is separate: dormant accounts may have been wrong because there were trading transactions.

    But on the tax side, are you saying that non-UK trading profits of a UK LLP with only non-resident members are still taxable in the UK, even where there are no UK operations or UK-source profits?

    I am trying to separate:

    1. Companies House accounting correction issue; and
    2. HMRC / UK tax liability issue for non-resident partners with no UK-source income.
    Thanks.
    Click to expand...
    Given there is absolutely no \UK involvement, why was it set up as a UK LLP? That rings huge alarm bells for me.
     
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    Rafikus

    Rafikus

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  • #7
    Newchodge said:
    Given there is absolutely no \UK involvement, why was it set up as a UK LLP? That rings huge alarm bells for me.
    Click to expand...
    what do you mean by red flag ??
    I set up the UK LLP after following online guidance about using a UK legal entity for an international online business. The reasons were mainly practical: credibility, contracts, and access to payment providers.
    I now understand I may have confused two separate issues: HMRC treatment for a UK LLP with non-resident members and no UK-source income, and Companies House dormant accounts rules.
    My aim now is simply to regularise the Companies House filings if dormant accounts were not appropriate, and separately confirm the HMRC position
     
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    Daybooks

    Daybooks

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  • #8
    1. It is a Companies House filing issue but may have tax implications.
    2. If accounts were incorrectly presented amended accounts may be voluntarily submitted under s454 Companies Act, The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) and The Companies (Revision of Defective Accounts and Reports).
    3. Companies House to not dictate the format, but the legislation requires generally accepted accounting principles to be applied. Essentially this will be FRS 102 or 105. This would require worldwide income. Hence item 2 is very relevant.
    4. Sounds like a very good idea. There may be other issues to consider.
    5. You should correct the defective accounts. Any tax implications simply follow on.

    Partnership profits generally flow through to the partners and get taxed according to the rules of the country applicable to where they are resident or where they are incurred.

    Good luck.
     
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    Rafikus

    Rafikus

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  • #9
    Daybooks said:
    1. It is a Companies House filing issue but may have tax implications.
    2. If accounts were incorrectly presented amended accounts may be voluntarily submitted under s454 Companies Act, The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) and The Companies (Revision of Defective Accounts and Reports).
    3. Companies House to not dictate the format, but the legislation requires generally accepted accounting principles to be applied. Essentially this will be FRS 102 or 105. This would require worldwide income. Hence item 2 is very relevant.
    4. Sounds like a very good idea. There may be other issues to consider.
    5. You should correct the defective accounts. Any tax implications simply follow on.

    Partnership profits generally flow through to the partners and get taxed according to the rules of the country applicable to where they are resident or where they are incurred.

    Good luck.
    Click to expand...
    That confirms my understanding that the first issue to correct is the Companies House filing, because dormant accounts were probably not appropriate if the LLP had trading transactions.
    I will gather the payment provider/bank records for each year and speak to a UK accountant about preparing amended LLP accounts under the appropriate FRS 102/105 basis.
    I will then deal with HMRC separately to confirm whether any Partnership Tax Return or UK tax liability arises, given that all members are non-UK resident and there was no UK-source income.
    Thanks again.
     
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    GLAbusiness

    GLAbusiness

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  • #10
    If the uk payment provider is channelling payments to the partnership then surely that becomes a UK source of income.
     
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    Rafikus

    Rafikus

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  • #11
    GLAbusiness said:
    If the uk payment provider is channelling payments to the partnership then surely that becomes a UK source of income.
    Click to expand...
    My understanding from HMRC HS380 is that if all partners are non-UK resident, the Partnership Tax Return should only show profits from UK operations. HMRC PM287000 also refers to partnerships with no UK resident partners, no UK income/gains, and managed and controlled outside the UK.

    So my question is: does merely using a UK payment provider make the income UK-source, even if the customers, suppliers, management, stock and operations are all outside the UK?
     
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    UK Contractor Accountant

    UK Contractor Accountant

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  • #14
    Yes, you can file amended (or revised) accounts with Companies House if you discover significant errors in a previous submission. Minor, non-material errors can usually be corrected in your next accounting period.

    How to Submit Amendments
    Because Companies House generally requires amended accounts to be on paper, you must prepare a full corrected set and send it by post.
    To ensure the accounts are accepted and replace the original, they must include:
    • The word "Amended" clearly displayed on the front cover.
    • A note stating that they replace the original accounts, that they are now the statutory accounts, and that they are prepared as they were at the date of the original accounts
      .
      • A signature from a company director.
      • A copy of the original accounts, if you are only amending a specific section.
    Check with your accountant, as certain authorized digital filing software (like IRIS or VT Final Accounts) allows you to submit revised accounts electronically.
     
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