The income tax and corporation tax transparency of the LLP applies only while the limited liability partnership is carrying on the trade, profession or business with the view to profit. Therefor if an LLP ceases to carry on a trade, profession or business, it may lose its tax transparency, and could be taxed in the UK as the corporate body. The profits of the LLP would in such case be liable to UK tax.
However, by virtue of what is now section 1273 CTA 2009, and section 863 ITTOIA 2005, where the members of an LLP are able to wind up the LLP’s affairs in an orderly way, without the formal appointment of a liquidator, in the course of a cessation of commercial activity, then the LLP’s tax transparency will be provided that: the LLP is not being wound up for reasons connected in whole or in part with the avoidance of UK tax. In addition, following the cessation of the LLP’s trade, profession or business the period of winding up is not unduly protracted taking account of the LLP’s assets and liabilities.