Mixed partnerships
The taxman seems to have it in for businesses that operate as partnerships, particularly if there is any hint that the business structure could be used to manage the partners' tax liabilities.
The latest target is mixed member partnerships. These are general partnerships or LLPs which include members who are not individuals, such as companies, other partnerships or LLPs, or individuals acting as trustees.
The mischief the taxman is trying to catch is the diversion of profit to a non-individual member which pays tax at a lower rate than the individual members. The law will be changed from 6 April 2014 to reallocate the profits back to the individual member.
A secondary effect of this new law will be that where profits are held back within the partnership for any reason, and are initially allocated to the non-individual member, those deferred profits must be reallocated for tax purposes so the individual members pay more tax.
If your partnership has corporate or trustee members, we should discuss how this change in the law will affect you.