The Government has introduced legislation to set up a new business structure - limited partnerships - which is aimed at giving start-ups better access to venture capital.
Limited partnerships are commonly used in other countries, especially the United States, as a vehicle for venture capital investment.
Like a
company, they provide investors with limited liability. Limited partners will not be taxed at the partnership level. Instead each will be taxed individually at his or her personal marginal rate in proportion to his or her share of the partnership's income.
Limited partners' tax losses will be restricted to their economic loss in that year.
There is provision for "safe harbour" activities, allowing limited partners to have a say in how the partnership is run, without being treated as participating in the management of the partnership and so losing their limited liability status. The legislation also tidies up tax laws relating to ordinary partnerships such as accounting and law firms, particularly relating to partners leaving the partnership.
Limited partnerships have been on the tax policy agenda since the Valabh committee of the early 1990s.
"It is an essential addition to the range of available structures," PricewaterhouseCoopers chairman John Shewan said. "It's only regrettable it has taken so long."
