Mixed partnerships - overview of measures in draft Finance Bill 2014

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Summary: Read this if you advise on partnership structures with a mixture of individual and non-individual partners.From April 2014 new tax rules may reallocate partnership profits or losses in these partnerships to produce a higher tax charge for the individuals.

Read this if you advise on partnership structures with a mixture of individual and non-individual partners.

From April 2014 new tax rules may reallocate partnership profits or losses in these partnerships to produce a higher tax charge for the individuals.

What are the new rules aimed at?

A variety of partnership structures take advantage of companies being taxed at a lower rate than individuals. Individuals are taxed at a top rate of 45%. The corporation tax rate has been falling over the past few years and will reach 20% next year. There is, therefore, a clear tax advantage to be gained from streaming more profits to a company partner (or more losses to an individual partner). The structures will usually allow the individuals to eventually access or benefit from that profit.

Some profit shifting arrangements are driven by regulatory requirements to defer profit distributions. The deferred profit is “warehoused” tax efficiently in a company partner until it vests. New rules designed to prevent such planning will apply from 6 April 2014, both to new and existing partnerships.

For more information please read the full article.

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