Hacked by Loard Mahdi

Read more...

Breaking news from the BBC Paper tax returns to be replaced by digital by 2020

Read more...

Education and VAT

Read more...

VAT Filing. Jan 2012

Read more...

HMRC Taskforce: transfer pricing arrangements

Read more...

 Contact Us

 
News Items
 
Tax Tips
 
Brilliant with numbers
Great with people
Clear and precise with advice
Timely and cost effective
In touch with issues that face our clients
Mindful of our client’s long term strategic goals
 
 
Helping Your Business is Our Business

Call us now on 023 8083 6900 ABDS Home

Tax Tip

New partnership arrangements

 The Finance Bill 2014 issued a series of changes affecting partnerships, but although this is still subject to receiving Royal Assent in the summer, it is expected to remain without any significant alteration.

 
The rules apply to all types of mixed partners, and secondly, to all salaried members of LLPs.
 
Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Since the introduction of the additional rate band, 50% in 2010-11 and 45% from 2013-14 for Income Tax, there has been an increase in the introduction of non-individual partners in LLPs or ordinary partnerships. We could be cynical and say that it is because corporate members pay Corporation Tax on their profit share at potentially 20% and not the higher band. But, there are sound commercial reasons why it could be set up this way and not just individual tax reasons.”
 
Under the new proposals, HMRC have the power to deem a company’s profit share to be that of the individual partners and thus subject to Income Tax. HMRC give several conditions where this will come into affect.
 
Stuart continues:
“Legislation will also be introduced in the Finance Bill 2014 to deny certain Income Tax loss reliefs and Capital Gains relief for a loss allocated to an individual partner where the individual is party to arrangements, where the main purpose is to secure that some, or all of the loss is allocated, or arises to the individual, instead of a non-individual, with a view to the individual obtaining relief.”
 
In relation to mixed partnerships consisting of non-individual partners, careful consideration must be made going forward, as fundamentally the tax incentives for setting up such partnerships have largely diminished and may now bring into question whether changes need to be made. 
 
Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“HMRC issued detailed guidance in February regarding salaried member rules. The new legislation is intended to ensure that LLP members whom they consider to be providing services on similar terms to those under an employment contract will then be treated as employees for tax purposes and therefore are subject to PAYE and NIC. 
 
The disguised employment legislation will disapply the Limited Liability Partnership Act (LLPA) 2000, which otherwise deems partners not to be employees for all purposes and will categorise salaried members as employed earners and ensure that no National Insurance class 4 charges arises on members categorised as employed earners.”
 
HMRC are introducing Targeted Anti-Avoidance Rules (TAAR) where arrangements are made to place members outside the scope of these provisions.
 
For example, where a partner makes a capital contribution to circumvent the rules (which must be in excess of 25% of their ‘disguised salary’), HMRC would consider whether the member undertakes genuine risk in the partnership in addition to investing capital, and where this is the case, would accept this as a commercial arrangement with substance. 
 
TK continues:
“In relation to salaried members of LLPs, the new rules look at the role each individual member plays in the business, their responsibilities and level of personal risk. If the member’s reward is based on the profitability of the business, and will rise or fall annually in line with the business performance (and potentially if there is a loss, there will be no reward), then the member will not be a salaried member.” 
 
 
If you need any help and advice on partnership agreements and the subsequent tax liabilities, contact ABDS to discuss how we can help.
 
ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900 E-mail: abds@netaccountants.net
 
Brilliant with numbers  
Great with people  
Clear and precise with advice
Timely and cost effective
In touch with issues that face our clients
Mindful of our client’s long term strategic goals
 
Helping Your Business is Our Business

« Back to Tax Tips