In addition, it is quite valid for a corporate vehicle to be a limited partner or general partner, and such a partner may be abroad, making it difficult to assess who the true owner is. The new requirements for persons exercising significant control (”PSCs”), which came into force in April last year, did not apply to limited partnerships, although there was a subsequent consultation in December this year, which was described as the implementation of Article 30: Beneficial ownership of companies and other legal entities. One of the issues consulted was whether Scottish limited partnerships should be placed under the PSC regime, which should require persons with significant control, even if they are overseas, to be reported to Companies House. A Scottish limited partnership, like any other partnership in the UK, has the advantage of being fiscally transparent. This means that a Scottish limited partnership is not taxed as a partnership. Instead, we look through the limited partnership as if it did not exist and the shareholders are instead taxed on the profits of the limited partnership`s activity. Compare this to a company that is taxed on its profits with corporate tax before its shareholders are taxed on the income they receive. This is one of the main attractions of a Scottish limited partnership – it has the advantage of a separate legal personality, while being fiscally transparent. Recent interest has certainly been sparked by a number of media reports claiming that limited partnerships registered in Scotland have been used as vehicles for a number of different forms of crime. Scottish newspapers headlined that Scotland is a ”tax haven” or ”Scottish companies used for money laundering in the former Soviet Union”. Earlier this year, the Department for Business Review, Energy & Industrial Strategy (BEIS) conducted a consultation on its review of limited partnership law: Call for Evidence.

But what was the consultation about and why now? We have already submitted comments to BEIS with some suggestions. For example, if the perceived harm is that the founding agents sell Scottish limited partnerships overseas to criminals, regardless of their use, action must be taken against those founding agents for failing to apply the appropriate anti-money laundering (”AML”) procedures. BEIS has spoken to various industry professionals and is currently reviewing comments. Currently, we don`t know the extent of the abuses – only the perpetrators and (hopefully) law enforcement agencies are able to know the true extent of the problem. However, it is not disputed that there is a problem and that measures should be considered to remedy it. These attractions have made Scottish limited partnerships particularly attractive as vehicles for a variety of legitimate uses, such as. B vehicles in investment fund structures. It is often necessary that a carry vehicle (representing the interests of the fund manager) and a feed and/or co-investment vehicle (representing the interests of investors) be present in fund structures. These vehicles will stand on top of another entity that would own the commercial property or other investment. These vehicles must be an entity with its own legal personality and, therefore, Scottish limited partnerships are a popular choice in such structures.

Structurally, a Scottish limited partnership works because it can be associated in another partnership, and it is attractive from a tax point of view because only the partners are taxed. Our last suggestion to BEIS was to give Companies House delisting power – if a Scottish limited partnership has been registered without an appropriate AML being made, or if the authorities believe it is being used for criminal activity, then Companies House should have the power to remove it. Again, this would help discourage any criminal enterprise from using a Scottish limited partnership where illegally acquired profits can potentially be held by a shameful company. Stephen Chan is a partner in the De Harper Macleod LLP Corporate team, which specializes in partnerships and limited partnerships. .