Changes were proposed in the Autumn Budget to clarify the tax treatment for Partnership businesses. Some draft legislation has been released which aims to make it clearer, in partnership tax returns, who the ultimate partners in a partnership are, their residence status (UK resident or non-UK resident) and what their share of the taxable profits is.
This is particularly relevant where a partner is a bare trustee who could be acting on behalf of an individual (whether UK resident or not) or on behalf of a partnership (which may include individuals or companies which may or may not be UK resident). This legislation requires a partnership to declare the relevant amounts in its return on four different bases for the participating partnership where relevant:
1. UK resident individual
2. Non-UK resident individual
3. UK resident company
4. Non-UK resident company
Allocation and calculation of partnership profit for tax purposes as shown on the partnership tax return is the allocation that applies for tax purposes for the partners. Taxable partnership profits must be allocated in the same way as commercial profits. A process will be put in place to handle disputes over the allocation of profits. This is planned to be in force for the 2018/19 partnership return.