Beneficiaries of a nominee or bare trust arrangement will be treated as partners under proposals to clarify the taxation of partnerships, a consultation outcome has revealed
Under the plans, the government expects the beneficiary of a nominee or bare trust arrangement to be named on the partnership return. Details of partners and taxable profit on all four possible bases – UK-resident individual; non-UK resident individual; UK-resident company and; non-UK resident company – is to be provided to HMRC and partner computations.
Where the details of all the ultimate recipients of the partnership profit have been provided to HMRC, the partnership will only have to prepare computations on the ‘bases appropriate to those persons’.
Partnerships which are reporting financial institutions as defined by the OECD Common Reporting Standard, and which have provided details of partners under the common reporting standard, will not be required to report the full details of those same partners on the partnership return.
The government does not currently intend to pursue the option of requiring a payment on account in situations where reporting requirements are not complied with.
The profit allocation stated in the partnership return will be the ‘first point of reference for HMRC in determining the taxable profits of each partner’, the consultation outcome says. There will be no requirement for partnerships to notify HMRC of changes in their profit sharing arrangements.
Partners are treated as taxable on their share in profits or losses that arose during the period in which they were partners or members and any retrospective variation to a partnership’s profit-sharing arrangements made after the period-end will not apply.
Profits of firms which have a company partner chargeable to income tax are calculated ‘as if a non-UK resident company was carrying on the business’, the document adds.
Partnerships are not taxed on their profits; instead individual partners are chargeable to income tax on their share of the partnership profits and to capital gains tax on their gains in respect of partnership assets. Corporate partners are chargeable to corporation tax on their share of profits and chargeable gains.
The consultation outcome can be read here.
