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Where Taxpayers and Advisers Meet
Partnerships: Panic Don't Panic
09/01/2019, by BKL, Tax News - Business Tax
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BKL's David Whiscombe gives some timely reminders on corporate partnerships.
For those who are dealing with tax returns of corporate partnerships, here are two pieces of information: one a warning and the other a reassurance. In what follows, “partnership” should be taken to include LLP; and we use “corporate partner” as a shorthand to include any non-individual partner.

The Warning

In any corporate partnership (by which we mean a partnership involving at least one corporate partner) it’s necessary to consider the potential application of the “mixed member” rules. Not only do these apply, as you might expect, to “mixed member” partnerships (that is, where the partners include both individuals and corporates); counterintuitively, they can also apply to partnerships where all the partners are in fact corporates (see ITTOIA s850D) — but only where it is “reasonable to believe” that the partnership would have been (or would have remained) a “mixed member” partnership but for the introduction of the “mixed member” rules.
In either case, the rules may apply where, very broadly, what would otherwise have been the profit share of an individual partner has been diverted to a corporate member. The point to bear in mind is that the application of the rules is self-assessed, so failing to take them into account can lead to the imposition of penalties.

The Reassurance

The filing date for certain partnership tax returns may not be quite as imminent as you had thought. Where at least one member of a partnership is a company, the filing date for an electronic return is one year after the end of the partnership’s accounting period. So if, in such a case, the partnership draws its accounts to 31 March, the 2017/18 partnership return is not late if it is filed by 31 March 2019.
Does this mean that you can in future gain an extra couple of months on your filing deadline by introducing into a partnership of individuals a company with a profit share of £1? Well, yes, in principle: though whether it’s worth the extra effort is questionable.

About The Author

BKL is a business name of Berg Kaprow Lewis LLP, Chartered Accountants and Tax Advisers, a limited liability partnership registered in England and Wales.

The information in this article is intended for guidance only. It is based upon our understanding of current legislation and is correct at the time of publication. No liability is accepted by Berg Kaprow Lewis LLP for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken.

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