Who pays CGT in partnerships and LLPs?

Who pays CGT in partnerships and LLPs?

• A. The partnership pays CGT.
• B. Individual partners pay tax on profits made on disposal of partnership assets.
• C. The government pays CGT on behalf of the partners.
• D. No CGT applies to disposal of partnership assets.

Answer: (B)

The key idea is that CGT in partnerships and LLPs is charged to the individual partners, not to the partnership as an entity. A partnership is treated as a transparent vehicle for tax: when it disposes of a capital asset, any gain is passed through to the partners in line with their share of the partnership. Each partner then reports their share of the gain on their own tax return and pays CGT accordingly. The partnership itself does not pay CGT. This also applies similarly to LLPs, where members are taxed individually rather than the LLP paying CGT. A helpful nuance is that if a partner themselves disposes of their interest in the partnership, that disposal can trigger a separate CGT event for the individual on that sale. So, the reason the correct answer is that individual partners pay tax on profits from disposing of partnership assets is that tax liability flows through to partners, not to the partnership as a separate taxable entity.

The key idea is that CGT in partnerships and LLPs is charged to the individual partners, not to the partnership as an entity. A partnership is treated as a transparent vehicle for tax: when it disposes of a capital asset, any gain is passed through to the partners in line with their share of the partnership. Each partner then reports their share of the gain on their own tax return and pays CGT accordingly. The partnership itself does not pay CGT. This also applies similarly to LLPs, where members are taxed individually rather than the LLP paying CGT. A helpful nuance is that if a partner themselves disposes of their interest in the partnership, that disposal can trigger a separate CGT event for the individual on that sale. So, the reason the correct answer is that individual partners pay tax on profits from disposing of partnership assets is that tax liability flows through to partners, not to the partnership as a separate taxable entity.