Consultation published – partnership taxation


Proposals to clarify the tax treatment of partnerships

HMRC has published a new consultation which considers five areas of partnership taxation where the rules are considered uncertain. This consultation is relevant to general and limited partnerships as well as LLPs, although HMRC expects there will be “no effect for the vast majority of partnerships.” As partnerships are being used more frequently as flexible business vehicles, HMRC is seeking to ensure the rules are clear, certain and fit for modern day practice.


The five areas which the government is consulting on are:


  • Clarification of who is the partner chargeable to tax – there are instances where the partners of limited partnerships and LLPs reported to Companies House do not agree to those reported to HMRC. The government is seeking to address this issue


  • Business structures that include partnerships as partners – in some partnership structures it is difficult to identify the “ultimate partner” i.e. in structures where an LLP is a partner of a general partnership. The government is proposing to look through the partnership or LLP that is the partner in the first partnership and to treat the partners of that partnership or LLP as partners in the first partnership
  • Investment income: tax administration – the government is looking to improve the administration of partnerships whose sole activity is investment activity, where there can be a large number of partners both UK and non-UK resident
  • Trading and property income: tax administration – in cases where a partnership does not provide details of some partners entitled to trading or rental income the government is suggesting a payment on account is made on behalf of the partners not identified
  • Allocation and calculation of partnership profit – the government has identified a number of areas where there is uncertainty in the rules which could lead to the inappropriate allocation or calculation of partnership profits.


This consultation closes on 1 November 2016. If you would like to submit any comments or responses to the nine questions posed for inclusion with the Tax Faculty response, please contact Sarah Ghaffari by 14 October 2016.