LLP SORP: key changes you need to know

4 Jul 2024

professional reading information about LLP Sorp

The LLP SORP is the Statement of Recommended Practice (SORP) for Limited Liability Partnerships (LLPs). The latest edition has recently undergone some revisions, aimed at enhancing transparency and clarity in financial reporting.

These updates provide LLP reporters with additional clarity on issues that are specific to LLPs and help to ensure that they present financial statements that are comparable with other entities. In this article, we outline some of the changes that, as an LLP, may impact your business.

Climate-related financial disclosures

The SORP has been updated to reflect The Limited Liability Partnerships (Climate-Related Financial Disclosure) Regulations 2022. The regulations are largely based on the Taskforce for Climate-Related Disclosure recommendations (TCFD) but are not identical; the most significant difference between the two is the omission of the requirement to disclose greenhouse gas emissions because of its duplication with existing UK legislation for Streamlined Energy and Carbon Reporting (SECR). This general alignment to the TCFD recommendations ensures that LLPs provide comprehensive and comparable climate-related financial information​. LLPs must assess and disclose their exposure to climate risks, strategies for mitigating those risks, and the impact of climate change on their financial performance.

These requirements impact large LLPs with more than 500 employees and over £500 million turnover or traded or banking LLPs which have over 500 employees for accounting periods commencing on or after 6 April 2022.

Interests in subsidiary LLPs

LLPs with subsidiaries on how to account for group profits related to interests in those subsidiaries. The revised SORP clarifies the treatment of profits arising from subsidiary activities. This includes determining whether a non-controlling interest is present by virtue of members interest in subsidiary LLP. , divisions of profit from the subsidiary LLP to members may be treated as a remuneration expense.

Automatic division of profit

The SORP provides guidance on how different types of member remuneration should be treated for accounting purposes. The latest revisions to the SORP include additional guidance on the automatic division of profits to members who do not provide substantive services to the LLP. For example, where a member of the LLP only provides capital, this would not constitute a substantive service to the LLP. As such, this may impact those working in the financial services sector with a corporate member or other members that do not provide substantive services to the . In this scenario, the automatic right to share of the LLP’s profits by members who do not provide substantive services should be treated as a return on capital.

Amounts payable to former members

The updated SORP provides clearer guidance on how to account for post-retirement benefits payable to former members of an . Various additional guidance is provided within the updated SORP to cover a variety of situations which may affect LLPs, for example where a payment of profits is required for a defined period post-retirement or until death of the former member.

There may be situations where an LLP enters into an arrangement that meets the definition of a share-based payment set out in section 26 of FRS 102. The revisions to the LLP SORP include additional guidance on the recognition and measurement of share-based payment arrangements in these circumstances. In addition, it provides the example of a former member being entitled to a proportion of the proceeds if the LLP is sold within a specified time frame; this would be recognised as a cash settled share-based payment arrangement in accordance with section 26 of FRS 102.

Effective dates

The new SORP is effective for any accounting periods commencing on or after 1 July 2024 with early adoption permitted. For those with 31 March year ends, this will impact you for the period ended 31 March 2026.

These updates provide LLP reporters with additional clarity on issues that are specific to LLPs and help to ensure that they present financial statements that are comparable with other entities.

How we can help

We have extensive experience of advising UK LLPs. Our experience includes:

  • Planning and organising efficient and value-add audits,
  • Supporting the members in preparation of annual financial statements (both UK GAAP and IFRS),
  • Preparing and filing the partnership tax return,
  • Reporting Accountant services on admission to a traded market, and
  • Structure and related tax efficiency advice.

Useful resources:

If you need support in navigating these changes, please get in touch with Tom Alun-Jones.

Contact Us

Tom Alun-Jones
Director, London

Key experience

Tom advises a range of commercial clients including owner-managed and international businesses across multiple sectors.
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