Undrawn profits

I act for a couple of entirely separate farming partnerships that comprise various family members in partnership with a limited company that is owned by one or more members of the family.

In one case the company already had a pre-existing trade that generated surplus cash enabling it to purchase some farmland. The company then entered into partnership with the farming family allowing the partnership to use its land and receiving a 20% profit share.

In the other case the company has no other trade and it simply bought farmland using money lent to it by the family and then entered into partnership with a 20% profit share.

These structures seem to have worked well for a number of years enabling some of the farming profits to be sheltered within the company at a lower tax rate. However most of the company's share of the partnership...