Mixed partnership anti-avoidance rules

The mixed partnership rules were announced in December 2013 and despite fundamentally impacting on the tax efficiency of many business structures, there is still a lack of clarity as to how these rules will apply in many practical situations.  BKL tax partner Anthony Newgrosh explores their scope in an article for Tax Journal.

 

Question

I act for an LLP which has always had only corporate members. In light of the mixed partnership rules, is it safe to introduce a new corporate partner into this structure?

Answer

ITTOIA 2005 s 850C deals with mixed partnerships, that is any partnership (including an LLP) in which an individual is a member together with a company where it is reasonable to suppose that the individual’s ‘deferred profit’ is included in the company’s profit share or that the individual has ‘power to enjoy’ the income of the company from the partnership and hence has an interest in it, thereby giving rise to a ‘double member’ position. Where in such cases the overall tax take from the individual and the company is lower than it would otherwise have been, the income of the corporate member may be assessed instead on the relevant individual. These rules apply to profits arising after 5 April 2014.   Section 850C does not therefore deal with partnerships and LLPs which have both corporate and individual members but where none of the individual members has an interest in any of the corporate members…

 

The full article is available to subscribers on the Tax Journal website.

 

 

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

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While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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