HMRC have released a policy paper and draft legislation clarifying the tax treatment of partnerships in particular situations, such as where bare trustees, or other partnerships are partners.
The draft legislation, which will be included in the Winter Finance Bill 2017-2018 clarifies, for 2018/19 onwards:
- A beneficiary of a bare trust is taxed in the same way as other individual partners.
- That all partners of a partnership (A) which is itself a partner in another partnership (B) are deemed to be indirect partners in B. This may result in the partnerships having to complete corporation tax and income tax computations in support of partnership tax returns.
- Investment partnerships with non-UK resident partners will be able to submit returns without UTR numbers for the non-resident partners.
In addition, for accounting periods starting on or after the date that the Bill receives Royal Assent:
- Profits adjusted for tax will be allocated in the same ratio as the accounting profit is allocated.
- That the allocation of profits on the partnership return applies for tax purposes for all of the partners. It will be possible to appeal to the Tribunal to settle disputes surrounding allocations.
These changes follow HMRC's earlier consultation 'Partnership taxation: proposals to clarify tax treatment'.
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