Category Archives: Partnerships

HMRC launch revised Statement of Practice D12 on capital gains for partnerships, following recommendations of the Office of Tax Simplification (OTS)

Capital gains for partnerships has a very limited amount of legislation. The area has been covered by a Statement of Practice (SP D12), issued by the then Commissioners of Inland Revenue following discussions with the Law Society and the Allied Accountancy Bodies in January 1975. In discussions with businesses and their advisers, the OTS found the statement was understood by large firms and most advisers, although smaller unrepresented firms and even some practitioners were not aware of the statement or its implications. Almost inevitably, the statement included references which had become out of date, and the writing style needed to benefit from more modern practices.

In our Review of Partnerships Interim and Final Reports, published January 2014 and January 2015 respectively, the OTS recommended keeping SP D12 largely intact rather than introducing a legislative version. However, the OTS was clear that the statement needed refining in some areas and updating into a more modern style with links to examples and further information within the HMRC guidance.

A sub-group of OTS stakeholders have continued to advise HMRC on the areas that needed updating, and the revised statement has now been published by HMRC. A number of stakeholders involved in the review of SP D12 commented they found the revised statement to be a considerable improvement over the original version.

The OTS is publicising this relaunch of SP D12 in order to raise awareness of the statement and the fact that it has been updated. As noted, smaller partnerships and some advisers need to be aware that this is the place to determine, for example, how partnership goodwill is subject to tax, together with the capital gains reliefs that may be claimable. HMRC endorse the need for reminding people on this and other partnership capital gains matters.

OTS Publishes report on taxation of partnerships

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