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The implications of Finance Bill 2014’s changes to rules for mixed partnerships
KEY POINTS
- Mixed partnerships exist for legitimate commercial reasons.
- Reallocating profits from a non-individual partner to an individual.
- What is power to enjoy?
- A non-partner may be treated as a partner.
Among a series of changes affecting partnerships in Finance Bill 2014 are proposals to allow HMRC to reallocate profits to individuals in partnership with companies or other non-individuals.
High-earning individuals in a partnership pay income tax at 45% and where 2% National Insurance applies retain 53% of their earnings after tax. A corporate member in the same partnership may get to keep 80% where the small companies’ rate applies.
HMRC perceived many partnerships included corporate partners who may do little or nothing to take advantage of this rate difference. Following a general consultation in 2013 draft rules were released with the...
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