Inconsistent figures

Profits shown on partners’ individual returns differed from those in the partnership return

The taxpayers were members of a limited liability partnership (LLP) accountancy firm BTG. In November 2011 it was acquired by Smith & Williamson LLP as a result of which the partners had ceased to be members of BTG and became members of Smith & Williamson or another firm of accountants.

The BTG accounts had been audited by Deloitte which confirmed they were compliant under generally accepted accounting practice (GAAP). They showed a loss but because of an ‘add back’ by designated members the partnership return included a profit.

The taxpayers considered there was no legal basis for the add back and filed their personal returns on that basis. They provided an explanation in the white space of their returns. HMRC decided the returns had understated their respective shares of BTG’s profit.

The...