The increased misuse of Scottish Limited Partnerships (SLPs) for fraudulent purposes has been the subject of notable negative press in recent weeks. In response, Finance Secretary Derek Mackay has formally called on the UK Government to reform the law surrounding SLPs, stating by letter:

“I recognise it will be important to secure the right balance whereby we do not get rid of the many benefits that are offered to legitimate businesses through SLPs, but it is important that we are not seen as a haven for those who wish to pursue criminal activity.”

Unlike limited partnerships (LPs) constituted elsewhere in the UK, the SLP has separate legal personality, allowing it to own assets and borrow money, etc., in its own name. The SLP also enjoys tax transparency, meaning that the SLP itself is not taxed as a separate legal entity; instead, the partners themselves are taxed on their share of partnership income and gains. It is this hybrid status that makes the SLP an attractive business vehicle.

However, concern has been raised over the minimal Companies House filing requirements of SLPs. Furthermore, because partners of SLPs can themselves be foreign corporations, it can be difficult to ascertain the true underlying ownership and governance structure.

In light of Derek Mackay’s letter, it is likely that any future SLP reform will focus on the creation of enhanced filing requirements to scupper fraudulent management and control. However, the SLP remains fully available to those wishing to take advantage of its legitimate benefits, most notably tax transparency and separate legal personality. You can read more about the advantages of the SLP here