26/03/2014

26/03/2014

Amended Accounting Rules for Qualifying Partnerships

Overview

Amendments to the Qualifying Partnership Regulations have been ap-proved by Parliament, effective for periods beginning on or after 1 Octo-ber 2013. The amendments (‘The Companies and Partnerships (Accounts and Audit) regulations 2013’) include an updated definition of a qualify-ing partnership, closing a loophole whereby some limited partnerships, in particular investment funds, have avoided filing accounts with the Registrar of Companies.

Under the ‘The Partnerships (Accounts) Regulations 2008 a partnership (including a limited partnership) is a qualifying partnership if each of its members is

• A limited company; or • An unlimited company, or a Scottish partnership, each of whose members is a limited company.

The regulations then state “any reference in the Qualifying Partnerships Regulations to the members of a qualifying partnership should be construed, in relation to a limited partnership, as a reference to its general partner or partners”.

This implies that the status of the general partner or partners would be considered when determining whether the partnership is a qualifying partnership. However, a view exists under the currently effective legislation (‘The Partnerships (Accounts) Relations 2008’) that by having a single limited partner with unlimited liability, such as an individual, a partnership does not meet the definition of a qualifying partnership, despite the fact that their liability is limited by virtue of being a limited partner.

This view is supported by the fact that the Government has found it necessary to amend the law rather than issue clarifying guidance.

The updated definition of a qualifying partnership now ensures that when the partnership is a limited partnership, only the status of the general partners is taken into account when considering whether it is a qualifying partnership. The effect is that more limited partnerships will fall under the definition of a qualifying partnership and, among other things, will need to prepare and file annual accounts and reports.

In addition to updating the definition of a qualifying partnership, the amendments also revise the rules around the publication of accounts and amend the definition of members for the purposes of applying the requirements of the regulations.

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