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Farms And Estates Need To Look At Implications Of HMRC Partnership Tax Clamp Down
17 June 2013 by Andrew Shirley Chatting to accountants Roythornes and Chaverys at last week’s Cereals event, the next looming tax issue for farms and estates seems to be the use of partnerships. As mentioned in my Budget blog, Chancellor George Osborne threatened a closer look at partnerships earlier this year. Typically, this was the kind of promise you knew he’d keep and HMRC has just released a consultation document inviting comments on its proposals, which it plans to introduce on 6 April 2014. Although HMRC says its changes will not impact on the use of partnerships for genuine business reasons, not everybody will have the same view on what constitutes a genuine business reason. While farming partnerships may not attract quite as much scrutiny as the likes of Google, it is probably worth any businesses involving a partnership, particularly where one or more of the partners is a company or trust, taking professional advice on the potential impact of the planned changes. The two areas the consultation looks at are: Disguised employment: an LLP member who works for the LLP on terms that are tantamount to employment. Profit and loss allocation schemes: members of LLPs and other partnerships where the members of the partnership consist of members who are chargeable to income tax and others who are not, but only where it is reasonable to assume that: • A main purpose of the partnership profit-sharing arrangements is to secure an income tax advantage for any person; or • A main purpose of arrangements in force is to allocate a partnership loss to a partner with a view to that partner obtaining a reduction in tax liability by way of income tax reliefs or capital gains relief. Profit and loss allocation schemes also cover tax-motivated arrangements whereby one partner transfers profits to another as a result of a revised allocation of profits in return for payment that is not taxed as income. Those wishing to respond to the consultation document have until 9 August 2013 to do so. Read the full HMRC consultation Continue reading
