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Interim report plans to patch up “fiscal footwear”
There is considerable scope for simplifying the tax rules for partnerships, the Office of Tax Simplification (OTS) has announced, recommending that HMRC give away filing software.
The independent body’s interim report on partnership taxation considers rules affecting 420,000 businesses in the UK and outlines both short-term fixes and longer-term changes to make processes straightforward and generate significant cost reductions.
As well as free software to allow partners to file tax returns like other individuals, the OTS posits bringing together all Revenue partnership guidance in to one place and the publishing of a model partnership agreement.
Late-filing penalties would be retooled to be fairer under the body’s proposals, while partners’ personal expenses would be accounted for in simpler manner and administrative burdens reduced through measures including abolishing partnership tax returns for some of the smallest concerns.
The OTS’s tax director, John Whiting, claimed his organisation had been struck by the number and variety of partnerships, which account for around 10% of UK businesses with a total annual turnover of £150bn, ranging from two-person firms to the big four accountants.
“The tax rules try and cope with them all and while the system broadly works, it’s creaking,” said Whiting.
He added, “The partnership tax system is a bit like an old, comfortable pair of shoes that both pinch and leak in places. A new tax code was considered, but that would be too much work and disruption for uncertain gains.
“Instead, we are recommending some immediate patches to improve now and in the future, to make sure this fiscal footwear works for this vital sector of the economy.”
Comments on the report can be submitted by email. The findings of the next stage of the OTS partnership review will be released ahead of the Budget on 19 March.
