Further Changes to Partnership Tax
HM Revenue and Customs is continuing to look into ways of tightening the taxation of Limited Liability Partnerships. This is following an extensive consultation on the topic, which began with an announcement in December 2012 that HMRC would try to prevent “abusive use” of partnership status.
The key intention of the latest changes is to catch out cases where employees are listed as partners in order to achieve a tax benefit. This will be achieved by the introduction of a new status as “Salaried Member.” People who hold this status will be taxed as employees even if they are classed as partners.
The new measures also seek to catch out partnerships that manipulate profit and loss to gain an “unfair advantage” from the flexible way in which partnerships are governed. In particular, they are keen to tackle cases of profit shares been allocated tax-free to corporate members. The changes are planned to take effect from 6th April 2014.