Partnerships have been often referred to as one of the simplest ways for two people to go into business together. So, the OTS found itself asking, why had we received so many comments on partnerships in previous reviews?
After 5 months of hard work, and receiving comments and views from nearly 1,000 people, the OTS has now published an interim report detailing the difficulties faced by partnerships- which make up 10% of UK business. The report covers the whole range of taxes, from income tax through to capital gains tax, SDLT, and VAT.
Fundamentally, the report highlights a feeling among business partnerships of being treated as ‘the poor relation’ by HMRC- this is partly due to the ‘one-size fits all’ nature of partnerships, which results in a very small amount of tax legislation being required to cope with the taxation of businesses of all shapes, sizes, and functions. This can lead to uncertainty and perceived inconsistency in treatment between businesses.
The OTS has identified a number of quick fixes that can be made now to make things simpler for partnerships (such as providing free software for partnerships to file online), as well as several longer-term areas, which require further research but could create significant simplification for partnerships. These include allowing personal expenses to be claimed by partners, or even abolishing the need for the partnership return entirely for some businesses.
Overall, the report suggests that HMRC needs to develop a more strategic approach with regards to the tax treatment of partnerships which properly acknowledges their place in UK business and internationally.
Many thanks to Roger Jones and Martin Gunson for taking the time to assist with the project, including speaking to a large number of partnerships and representative organisations. Do you have anything to say about the partnerships review? Please feel free to comment below, or email us at email@example.com.