15 Jul 2015

Mixed partnership anti-avoidance rules

BKL in the press, Insights, Publications

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.