HMRC have published a response to their consultation ‘Partnership taxation: proposals to clarify tax treatment’.

The original consultation contained a number of proposals to remove uncertainty and provide clarity for partnerships.  In particular, to ensure that there is greater transparency over the person ultimately entitled to the profits of the partnership.

In their response HMRC state that:

  • Legislation will be introduced to ensure that the beneficiary of a nominee or bare trust arrangement is treated as a partner.  The beneficiary will have to be named on the partnership return.
  • Where there is a chain of partnerships, profit generating partnerships will not be required to report the ultimate recipients of their profits through the chain on their return.
  • Instead, such partnerships will have to:
    • Report the details of their partners, and
    • If the details of all ultimate recipients have not been provided to HMRC, provide computations of taxable profit on all 4 possible bases (i.e. resident and non-resident, company and individual).
  • Investment partnerships which provide details under the Common Reporting Standard (CRS) will not have to report these again to HMRC.
  • Proposals to require a payment on account where reporting requirements are not met have been dropped.
  • The profit allocation shown in the partnership return will be HMRC’s first point of reference.
  • There will be no requirement to inform HMRC of changes in profit sharing arrangements.
  • Retrospective changes to profit sharing arrangements after the period end will not apply.
  • Partnerships with a corporate partner chargeable to income tax will have to calculate profits as if a non-UK company was carrying on the business.

It is intended that legislation will be included in the second Finance Bill of 2017 to apply to accounting periods starting on or after 5 April 2018.

Draft legislation will be published for consultation later this year.


Consultation response: Partnership taxation: proposals to clarify tax treatment

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