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Partnership anti-avoidance provisions

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Partnership anti-avoidance provisions

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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This guidance notes covers some of the key provisions in a number of anti-avoidance provisions which may be relevant in the context of partnership planning. The rules should be properly applied according to the facts of each case.

Mixed partnerships and profit allocations

A mixed partnership is a partnership made up of a mixture of individual and non-individual members. Non-individual members are often companies but could also be trusts or even LLPs.

Legislation tackles tax motivated allocations of business profits or losses in partnerships made up of both individual and non-individual members. This is needed because individual members of a partnership may pay income tax at the higher rates compared to a corporate member, see the Computation of corporation tax guidance note for more information).

Therefore, in some cases, it may be possible to allocate excessive profits to a corporate member which would then be subject to lower corporation tax rates rather than higher income tax rates. Further, excessive losses could be allocated to an individual enabling them to benefit from tax relief at higher income tax rates.

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