Changes to partnership taxation should be deferred or dropped

01 November 2016

Mark Waddilove

As announced at Budget 2016, the government has been consulting on how partnerships calculate and report their taxable profits and liabilities. The consultation, which closes today (1 November), included a number of areas where the taxation of partnerships could be seen as uncertain in the context of the wide variety of partnerships operating in different sectors.

RSM responded to the consultation document expressing concerns that the objectives of a modern tax system would not necessarily be achieved by the proposals set out on the consultation document. RSM deals with a large number of partnerships and LLPs (collectively known as 'partnerships'), operating in a wide range of sectors and industries and we fail to see why any additional legislation is needed. Indeed, from practical experience, we have not come across the situations of ambiguity and uncertainty to which the consultation document refers.

In summary, our general conclusion is that the proposals outlined will simply increase the level of administration required by our clients and possibly HMRC itself, without improving the status quo. Furthermore, we believe that the proposals will limit the flexibility that partnerships offer and impose a certain level of rigidity which contrasts with the relatively greater freedom afforded to corporate structures.

And finally, any such move to 'simplify' partnership taxation and administration should be done in conjunction with the move to the Making Tax Digital (MTD) environment. Any such changes should therefore be deferred until such time MTD is embedded into the tax system.

For more information please get in touch with Mark Waddilove, or your usual RSM contact.