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Our client is a large professional partnership with UITF40 adjusted income of £6 million, the first tranche being taxable in 2005-06. Unfortunately, there was a partnership split in 2006-07 where four partners left in very acrimonious circumstances.
To provide for the tax arising on the UITF40 adjusted income, a 'UITF40 tax reserve' was created in the partnership's balance sheet and 40% tax was provided against the whole £6 million. The balance of the £6 million (i.e. £3.6 million) was credited to the relevant partners in their respective profit sharing ratios.
Our client is a large professional partnership with UITF40 adjusted income of £6 million the first tranche being taxable in 2005-06. Unfortunately there was a partnership split in 2006-07 where four partners left in very acrimonious circumstances.
To provide for the tax arising on the UITF40 adjusted income a 'UITF40 tax reserve' was created in the partnership's balance sheet and 40% tax was provided against the whole £6 million. The balance of the £6 million (i.e. £3.6 million) was credited to the relevant partners in their respective profit sharing ratios.
The rationale behind the UITF40 tax reserve was to provide for future tax on this income and release it against those liabilities each year as they arise. This ensures that incoming partners who are assessed on this UITF40 income in future years will have a corresponding tax credit release from the UITF40 tax reserve to match against...
Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.
