Mixed partnership tax consultation

Combine harvester and dark cloudsNFU responds to HMRC proposals - taxation of mixed partnerships

In a recent consultation HMRC suggested that legislation is needed to prevent certain forms of partnership from gaining an unfair tax advantage. This includes mixed membership partnerships, consisting of both individual and limited company partners, which seek to manipulate profit and loss shares in order to gain a tax advantage.

HMRC have proposed rules which would allow them to re-allocate the taxable profits or restrict losses of a mixed membership partnership where certain tests are met and a tax advantage has been obtained.

The NFU has worked with a number of other agricultural and professional bodies and met with HMRC to discuss the consultation and proposals. We have also produced a joint response to HMRC’s proposals.

Our response sets out our concerns that HMRC's proposed tests for applying "anti-avoidance" rules are extremely subjective and risk adversely affecting mixed partnerships which exist for genuine commercial, risk protection or land tenure reasons, rather than for tax avoidance. We believe that if HMRC’s proposals are implemented as currently suggested they will create a great deal of uncertainty for such businesses, as well as potentially substantial costs in defending profit and loss allocations.

We look forward to engaging with HMRC further over the coming months as they consider the consultation responses and prepare any draft legislation and guidance. If you have particular concerns with HMRC's proposals we would be pleased to hear from you.

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