Simmons & Simmons response to HM Revenue & Customs' consultation on proposals to clarify the tax treatment of partnerships and LLPs.
Simmons & Simmons has responded to HM Revenue & Customs’ consultation on proposals to clarify the tax treatment of partnerships reported in our earlier article, “Partnership taxation consultation released”. Our response welcomes the general recognition that partnerships and LLPs continue to be, and are intended to be, used as flexible vehicles. However, we have expressed concern that a number of the proposed changes cut across this key feature of partnerships and LLPs and recommend that the Government should reconsider these proposals.
In particular, we are concerned over proposals included in the consultation to restrict the existing flexibility around profit sharing. Any attempts to override the contractual profit sharing position for tax purposes could result in partners being taxed on profits to which they are not entitled and should not be taken forwards (in the absence of specific anti-avoidance provisions).
More generally, we make the point that partnerships and LLPs used as investment fund vehicles and as trading vehicles are, in practice, very different. As such, there may be a case for different regimes to apply to the two types of partnership/LLP.
Finally, our response draws attention to the large number of recent changes to the UK taxation regime applicable to partners and partnerships and recommends there should be no further changes before affected taxpayers have the opportunity to become accustomed to these recently implemented changes.
Read the full Simmons & Simmons response here
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