As previously indicated in the Budget 2013, HM Revenue & Customs (HMRC) has published its partnership consultation document setting out proposed changes to the taxation of partnerships due to take effect from 6 April 2014.
The consultation proposes changes to two aspects of the partnership tax rules where the Government perceive there to be a tax loss arising from disguising employment relationships through limited liability partnerships (LLPs), and from certain arrangements involving the allocation of profits and losses among partnership members. Broadly the intention appears to be to prevent situations where partners are in fact employees and to restrict the ability to allocate profits to corporate members to gain a tax advantage.
The full details of the consultation can be found here.
Representations on the consultation are requested by 9 August 2013
Given that LLPs have been a structure of choice for the investment management industry this may, depending on the outcome of the consultation, have a significant impact on many in the sector and could create conflicts and difficulties with compliance of prevailing regulatory regimes. However, given that LLPs are also the structure of choice for many of the leading professions in the UK we would expect the consultation process to be well considered and hopefully result in practical solutions.