CTM36540 | Particular topics: companies in partnership : interest paid etc
From HM Revenue & Customs · Company Taxation Manual
Yearly interest
explains the circumstances in which a company is required to deduct Income Tax on payment of yearly interest. provides that this also applies to payments of yearly interest made by or on behalf of a partnership (including an LLP to which applies – see ) of which a company is a member. In what follows, references to ‘partnership’ are to partnerships and LLPs with a company member, except where the context requires otherwise. It is the partnership which has the obligation to deduct and account for Income Tax.
The tax deducted from such payments is accounted for under : see and S963 (1)(a), which makes provision for the collection of Income Tax in respect of payments from which a person other than a UK resident company is required to deduct a sum representing Income Tax.
makes provision also for the deduction of tax from annual payments and patent royalties in certain circumstances. applies to annual payments made by non-individuals and makes provision for non-individuals in relation to royalties. See and .
explains the circumstances in which the obligation to deduct tax on payment is removed for certain payments made on or after 1 April 2001. This provision may apply to payments by a partnership where any member is a company, and to recipients which are partnerships all of whose members are UK resident companies.
Obligation to deduct and account for income tax – legal basis
An LLP is under the Limited Liability Partnerships Act 2000 a body corporate, see , but an LLP carrying on a trade or business is treated like a partnership for specified purposes. provides that, unless otherwise provided for, references to a firm or partnership include an LLP, references to a company do not include an LLP and activities are treated accordingly. makes similar provision for Income Tax. And , which applies to all ‘firms’, meaning trading partnerships, provides that, unless otherwise indicated, a firm or partnership is not to be regarded for Income Tax or Corporation Tax purposes as an entity separate and distinct from its partners. However, is just such a contrary indication. It follows that the firm or partnership must deduct and account for income tax, regardless of its status (as a limited or limited liability partnership, for instance, so long as there is a corporate member).