29 January 2015 | Online since 2003



14 January 2014|Finance,News

Mixed partnerships should beware new tax rules


Farming partnerships that include a mix of individual members and companies or trustees should be aware of new anti-avoidance tax rules.

Draft legislation, which will form part the Finance Bill 2014, seeks to target tax-motivated arrangements involving mixed partnerships, warns accountant Old Mill. This could affect profit-sharing agreements whereby partners aim to minimise individual tax bills.

“Many farmers have a corporate structure which allows them to take advantage of lower tax rates,” says Anne Gardner-Thorpe, tax manager at Old Mill. “But where that company is also part of a partnership, businesses could find themselves with markedly higher tax bills.”


In many cases, individual partners have reduced their own income tax liability by diverting partnership profits to a non-individual partner – typically a company or trustee, which pays a lower rate of tax on its profit share, says Miss Gardner-Thorpe. “Broadly, this draft legislation seeks to override these profit sharing agreements, so that the profit allocated to the non-individual member is taxed on those individual partners who stand to benefit from the non-individual’s profit.”

For example, a farming partnership with a taxable profit of £40,000 is split equally between three individual partners and a company, solely held by the same individual partners. The company would usually pay tax at 20% on its profits, while higher rate individual taxpayers would pay tax at 40%. Under the new proposals, the profit share allocated to the company will be re-attributed to those shareholders who are also individual members of the partnership.


The draft legislation also tackles situations where profits allocated to a non-individual partner actually represent services that have been performed by a person who is not a partner, says Miss Gardner-Thorpe. “Where it would be reasonable to assume that the person would have been a partner but for the inclusion of the non-individual member, tax will be levied on the individual, not the corporate member.”

The second element of the legislation seeks to prevent individual partners from using partnership losses to reduce their personal tax liability through securing certain loss reliefs.

“Partnerships are traditionally the most common business structure for farming families, many of which also include a company partner,” says Miss Gardner-Thorpe. “Although the legislation is designed to catch tax-motivated arrangements, now is a good time to review any business structures that might be affected.”

The legislation is due to come into force from April, and will apply to profits generated from April 2014 – although the anti-avoidance measures have already come into effect, she adds. “That does not leave long to make alternative arrangements. It is imperative that farmers review their business structure now, to ensure it is suitable for their circumstances, and that it will not fall foul of the new legislation.”

Download



Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


24 January 2015
Food Technologist
Food, FMCG, Fruit, Salad, Fresh Produce, Meat, Bakery, Dairy, Poultry, Ready Meals, Confectionery. Our client, a food process...

13 January 2015
Senior Farm Ranger HCC1645051
With proven hands-on experience in agriculture, you’ll be able to fulfil the physical requirements of the role, including wor...

21 January 2015
Band 5 Admissions Manager
It comprises Barnet Hospital, Chase Farm Hospital, the Royal Free Hospital and more than 30 services in the community....

16 January 2015
HV Electrician -Immediate contract in England
You will be responsible for maintenance, fault finding and validation on the electrical distribution network for a solar farm...

14 January 2015
Legal Secretary - Real Estate
The Legal Secretary will need to hit the ground running and will involve varied duties such as drafting letters, dairy manage...




Top stories you may have missed
12 November 2014 | Arable
GM crops 'good for farmers and the envir...

GM crops 'good for farmers and the envir...

GM crops are good for the economy and can reduce the amount of pesticides u...


6 November 2014 | Cattle
Smaller European markets drive beef expo...

Smaller European markets drive beef expo...

Demand from smaller European markets has helped drive strong growth for UK ...


6 November 2014 | Agri Safety
Lack of engineers a 'ticking time bomb' ...

Lack of engineers a 'ticking time bomb' ...

A lack of engineers, not enough people promoting the land-based industries ...


4 November 2014 | Bees and Beekeeping
Bee action plan due: Last chance for bee...

Bee action plan due: Last chance for bee...

Environment Secretary Elizabeth Truss is launching the National Pollinator ...


4 November 2014 | Arable
Experts welcome financial boost for youn...

Experts welcome financial boost for youn...

Agricultural specialists have welcomed a potential financial boost for youn...


3 November 2014 | News
Supermarket competition on prices 'risks...

Supermarket competition on prices 'risks...

As retailers continue to participate in a highly competitive race to the bo...


31 October 2014 | Arable
New Defra farm figures 'underline volati...

New Defra farm figures 'underline volati...

New farm business income data from Defra, which focus on income from March ...


30 October 2014 | Agri Safety
Agriculture remains one of UK's most dan...

Agriculture remains one of UK's most dan...

Agriculture has remained one of the industries in which workers are most li...


29 October 2014 | Finance
UK farmland prices see 'substantial grow...

UK farmland prices see 'substantial grow...

Prime arable land in the UK has seen a substantial year-on-year growth in p...


27 October 2014 | Arable
Satellites to help farmers pinpoint dise...

Satellites to help farmers pinpoint dise...

A new mobile app for farmers able to pinpoint and identify disease, pests a...