Do I need to pay US income tax on foreign (UK) earned income?

Do I have to pay UK income tax if I'm a non-resident and I'm a partner in a UK LLP?

• Me and my partners, we are residents of Russia (non-residents of the UK), and we plan to found a Limited Liability Partnership (LLP) in the UK. The LLP then will provide services to EU companies, which reside outside the UK. Russia has signed a double taxation convention with the UK (the text is here: http://www.hmrc.gov.uk/taxtreaties/in-force/russia-dtc.pdf), but it does not mention income from partnerships. Is it correct that no Corporation tax is applied? (as partnership's profit is its partners' income) Will the partners be liable to the UK income tax or Russian income tax? I have searched HMRC and other sources, but to no avail :( Thanks!

• Answer:

  A partnership is transparent, meaning that for taxation purposes it is the partners themselves who are liable to pay income tax. Partnership taxation isn't terribly complicated. The partnership draws up a set of accounts, and the profits are then divided between the partners in accordance with the agreement in force at the time the profits are earned. Each partner is then liable tax to his/her (or its) share of the profits in accordance with their own circumstances. The partnership profits will be calculated under UK law without reference to the DTC. The partnership is registered in the UK and subject to UK rules. And, since a partnership doesn't pay tax, the DTC cannot apply. In calculating its profits the partnership can take notice of money that is earned outside the UK, and a proportion of the profits can be attributable to non-uk sources. It is the individuals that pay tax. Each individual can refer to the DTC - article 7 applies because this is a business. The partnership is registered in the UK therefore has a permanent establishment here. The DTC gives taxation rights to the UK. If a partner is not resident in the UK he, she, or it, may not be liable to tax on profits earned outside the UK (hence the partnership gives notice in its return what proportion of the profits are attributable sources outside the UK.). As said, it depends on the individual circumstances of the partner to determine how much of their share will be liable to UK tax. ============== Petrusclavus. Stick with the P46 questions. At least you can answer them correctly. You need to realise that tax does not revolve around P45s and PAYE, and whatever little knowledge you have about them does not translate into the world of taxation. You know nothing about tax: your answers on this forum demonstrate that. It is worrying that someone who works for HMRC on a PAYE section can have such a worryingly inflated perception of their ability. No wonder the department is in such a bad way. An LLP is a partnership. A partnership is not a Ltd company and is not a legal entity. You cannot sue a partnership, and HMRC cannot tax one. The partners pay income tax on their share of the profits. If one doesn't pay, you can't force another to pay on their behalf.