View the article online at http://citywire.co.uk/wealth-manager/article/a723174
Is partnership tax review using a 'sledgehammer to crack a nut'?
by Elsa Buchanan on Dec 06, 2013 at 11:34
‘A partnership is like a lot of these things that have gotten abused to a certain extent,’ he conceded. Nonetheless, he hopes that HMRC will not go beyond the proposals and ‘destroy the concept of what a partnership is’.
Implementation-wise, Scott says the government should separate partnerships that have a limited company that invests in the business, and those created to divert profits, which he says should be easy to look into.
For George Bull, senior tax partner at Baker Tilly, the government’s next step will be to target partnerships which have individual members but also limited company members.
‘There is a fairly common structure, where the corporate member will pay lower rate corporate tax than the individual members. This is used to retain profits and reduce reliance on bank borrowing.’
Bull explained he ‘understood’ why members would do that, but said he wanted LLPs to be free of members who used such structures to reduce their tax bills.
In spite of the concerns that Johnson has about the unintended consequences of the new rules, he is broadly supportive of the decision to make LLP structures more ‘legit’.
‘There is nothing wrong with the attempt to make them more transparent, and make sure tax dodgers are put aside. It is great that Treasury is genuinely encouraging enterprise.’
‘What would be helpful would be to have a sort of scheme which would ‘approve’ partnership, and under which the anti-avoidance rules wouldn’t apply. If we knew we could run our business in a nice and clean fashion and get on with it/ that would make life a lot easier.’More details are set to be announced in new week’s Finance Bill.
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