Mixed partnerships - Revision history

Designing Buildings at 07:41, 4 December 2020

2020-12-04T07:41:18Z

← Older revision		Revision as of 07:41, 4 December 2020
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−		+	= Introduction =
−	= ~~'''~~Introduction~~'''~~ =	+

	Many professionals working in design and construction have established themselves as a Limited Liability Partnership (LLP) and some of these may be 'mixed partnerships'. This means that the members of the LLP are both corporate and individual members.		Many professionals working in design and construction have established themselves as a Limited Liability Partnership (LLP) and some of these may be 'mixed partnerships'. This means that the members of the LLP are both corporate and individual members.
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	= HMRC =		= HMRC =

−	HM Revenue & Customs (HMRC) however, view the existence of mixed partnerships rather differently and believe there is a significant loss to the exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions (NICs).	+	HM Revenue & Customs (HMRC) however, view the existence of mixed partnerships rather differently and believe there is a significant loss to the exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions (NICs).

	So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed 'excessive' by HMRC.		So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed 'excessive' by HMRC.
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	To understand this more fully some brief examples are provided:		To understand this more fully some brief examples are provided:

−	== ~~'''~~Example A~~'''~~ ==	+	== Example A ==

−	UK Building LLP makes a profit of £200,000 to ~~31<sup>st</sup>~~ March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance).	+	UK Building LLP makes a profit of £200,000 to 31st March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance).

−	== ~~'''~~Example B~~'''~~ ==	+	== Example B ==

−	UK Building LLP makes a profit of £200,000 to ~~31<sup>st</sup>~~ March 2013 and has three members: Tom, John, and ABC limited. In this example however, £80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited. In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.	+	UK Building LLP makes a profit of £200,000 to 31st March 2013 and has three members: Tom, John, and ABC limited. In this example however, £80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited. In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.

	So the total tax take is £68,400 in Example A but only £42,000 in Example B		So the total tax take is £68,400 in Example A but only £42,000 in Example B
Line 29:		Line 28:

	HMRC are introducing revisions in the Finance Bill 2014 which will re-allocate 'excess' profits allocated to a non-individual member where the following conditions are met:		HMRC are introducing revisions in the Finance Bill 2014 which will re-allocate 'excess' profits allocated to a non-individual member where the following conditions are met:
−	*A non-individual has a share of the firm’s profit.	+
−	*The non-individual’s share is excessive.	+	* A non-individual has a share of the firm’s profit.
−	*An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place, and;	+	* The non-individual’s share is excessive.
−	*It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.	+	* An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place, and;
		+	* It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.

	These proposals will affect all mixed partnerships regardless of their rationale. Those that have a sound commercial basis for their structure will be affected just as those which exist for tax saving purposes alone.		These proposals will affect all mixed partnerships regardless of their rationale. Those that have a sound commercial basis for their structure will be affected just as those which exist for tax saving purposes alone.
Line 38:		Line 38:
	It is likely that many LLPs will opt to incorporate, but for those LLPs for whom this in neither desirable nor a viable option the matter of profit allocation with effect from April 2014 will become fraught with adverse consequences if these new rules are triggered.		It is likely that many LLPs will opt to incorporate, but for those LLPs for whom this in neither desirable nor a viable option the matter of profit allocation with effect from April 2014 will become fraught with adverse consequences if these new rules are triggered.

−	----	+	-----
−		+	This article was written by:--[[User:Martinc\|Martinc]] 12:35, 20 February 2014 (UTC)
−	This article was written by:--[[User~~%3AMartinc~~\|Martinc]] 12:35, 20 February 2014 (UTC)	+

−	= ~~Find out more~~ =	+	= Related articles on Designing Buildings Wiki =

−	~~=== Related articles on Designing Buildings Wiki ===~~	+	* Business model.
−	*Business model.	+	* Construction industry institutes and associations.
−	*Construction industry institutes and associations.	+	* Construction organisation design.
−	*Construction organisation design.	+	* IR35.
−	*IR35.	+	* Joint venture.
−	*Joint venture.	+	* Payroll companies.
−	*Payroll companies.	+	* Partnering and joint ventures.
−	*Partnering and joint ventures.	+	* Personal service company.
−	*Personal service company.	+	* Types of construction organisations.
−	*Types of construction organisations.	+	* VAT
−	*VAT	+

−	[[Category:~~Other_legislation~~]] [[Category:~~DCN_Legislation~~]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Other_legislation]] [[Category:Taxation]] [[Category:Cost_/_business_planning]]
−	[[Category:Taxation]]	+
−	[[Category:Cost_/_business_planning]]	+

Designing Buildings: moved Mixed Partnerships to Mixed partnerships

2014-07-30T07:06:16Z

moved Mixed Partnerships to Mixed partnerships

← Older revision

Revision as of 07:06, 30 July 2014

Gregor Harvie at 11:25, 24 February 2014

2014-02-24T11:25:19Z

← Older revision		Revision as of 11:25, 24 February 2014
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	== '''Example A''' ==		== '''Example A''' ==

−	UK Building LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance)	+	UK Building LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance).

	== '''Example B''' ==		== '''Example B''' ==

−	~~UKBuilding~~ LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. In this example however, £80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited. In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.	+	UK Building LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. In this example however, £80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited. In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.

	So the total tax take is £68,400 in Example A but only £42,000 in Example B		So the total tax take is £68,400 in Example A but only £42,000 in Example B
Line 56:		Line 56:
	*VAT		*VAT

−	[[Category:Other_legislation]]	+	[[Category:Other_legislation]] [[Category:DCN_Legislation]]
	[[Category:Taxation]]		[[Category:Taxation]]
	[[Category:Cost_/_business_planning]]		[[Category:Cost_/_business_planning]]

Gregor Harvie at 11:19, 24 February 2014

2014-02-24T11:19:08Z

← Older revision		Revision as of 11:19, 24 February 2014
Line 4:		Line 4:
	Many professionals working in design and construction have established themselves as a Limited Liability Partnership (LLP) and some of these may be 'mixed partnerships'. This means that the members of the LLP are both corporate and individual members.		Many professionals working in design and construction have established themselves as a Limited Liability Partnership (LLP) and some of these may be 'mixed partnerships'. This means that the members of the LLP are both corporate and individual members.

−	It is~~, of course,~~ perfectly permissible for a company to be a member of a LLP and there are a variety of reasons why it may be considered appropriate or necessary for such an arrangement to be put in place. For example a corporate member could be the provider of much needed capital to a LLP, or it could be a provider of very specific services which could, be of benefit to the LLP’s clients.	+	It is perfectly permissible for a company to be a member of a LLP and there are a variety of reasons why it may be considered appropriate or necessary for such an arrangement to be put in place. For example a corporate member could be the provider of much needed capital to a LLP, or it could be a provider of very specific services which could be of benefit to the LLP’s clients.

	= HMRC =		= HMRC =

−	~~Her Majesty's~~ Revenue & Customs (HMRC) however, view the existence of mixed partnerships rather differently and believe there is a significant loss to the exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions (NICs).	+	HM Revenue & Customs (HMRC) however, view the existence of mixed partnerships rather differently and believe there is a significant loss to the exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions (NICs).

−	So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed ~~to be~~ 'excessive' by HMRC.	+	So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed 'excessive' by HMRC.

	To understand this more fully some brief examples are provided:		To understand this more fully some brief examples are provided:
Line 16:		Line 16:
	== '''Example A''' ==		== '''Example A''' ==

−	~~UKBuilding~~ LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance)	+	UK Building LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance)

	== '''Example B''' ==		== '''Example B''' ==

Designing Buildings at 10:24, 24 February 2014

2014-02-24T10:24:25Z

← Older revision		Revision as of 10:24, 24 February 2014
Line 1:		Line 1:

−	~~<br/>~~'''~~Mixed Partnerships and HMRC~~'''	+	= '''Introduction''' =

−	~~<br/>~~	+	Many professionals working in design and construction have established themselves as a Limited Liability Partnership (LLP) and some of these may be 'mixed partnerships'. This means that the members of the LLP are both corporate and individual members.

−	~~Many professionals working in the design and construction sectors have established themselves as~~ a ~~Limited Liability Partnership (“LLP”)~~ and ~~some~~ of ~~these~~ may ~~well~~ be ~~“Mixed Partnerships”~~.	+	It is, of course, perfectly permissible for a company to be a member of a LLP and there are a variety of reasons why it may be considered appropriate or necessary for such an arrangement to be put in place. For example a corporate member could be the provider of much needed capital to a LLP, or it could be a provider of very specific services which could, be of benefit to the LLP’s clients.

−	~~By this I mean that the members of a LLP are both corporate and individual members.~~	+	= HMRC =

−	~~It is~~, of ~~course, perfectly permissible for a company to be a member of a LLP~~ and there ~~are~~ a ~~variety of reasons why it may be considered appropriate or necessary for such an arrangement~~ to ~~be put in place. For example a corporate member could be~~ the ~~provider~~ of ~~much – needed capital~~ to ~~a LLP~~, ~~or it could be a provider of~~ very ~~specific services to~~ the ~~LLP which could, in turn, be~~ of ~~benefit to the LLP’s own clients~~.	+	Her Majesty's Revenue & Customs (HMRC) however, view the existence of mixed partnerships rather differently and believe there is a significant loss to the exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions (NICs).

−	~~HMRC however~~, ~~view the existence of Mixed Partnerships rather differently and believe that there~~ is a significant ~~loss to~~ the ~~Exchequer through the use of such arrangements to avoid~~ or~~, at the very least defer, the payment of tax~~ and ~~national insurance contributions~~.	+	So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed to be 'excessive' by HMRC.

−	So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are ~~controlled by or associated with individual members and which are allocated profit shares that are deemed to be “excessive” by HMRC.~~	+	To understand this more fully some brief examples are provided:

−	~~To understand this more fully a brief example is provided as follows:~~	+	== '''Example A''' ==

−	~~'''Example A'''~~	+	UKBuilding LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited. In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance)

−	''~~The” UKBuilding LLP” makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members:~~''	+	== '''Example B''' ==

−	''Tom, John, and ~~“ABC limited” ''~~	+	UKBuilding LLP makes a profit of £200,000 to 31<sup>st</sup> March 2013 and has three members: Tom, John, and ABC limited. In this example however, £80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited. In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.

−	~~''The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited.''~~	+	So the total tax take is £68,400 in Example A but only £42,000 in Example B

−	~~''In this scenario Tom and John will both pay around £34,200 in~~ tax ~~and National Insurance (based upon 2013 tax year parameters~~, ~~and assuming~~ the ~~single person’s~~ tax ~~free allowance)''~~	+	This simple analysis does not explain the whole story as further tax would be payable on income taken from ABC Limited either in the form of salary or dividends but in the event that no such income is taken or is deferred to a much later date, it is clear that there is a cash flow detriment to the Exchequer. At worst, there is a clear loss to the Exchequer in the event that when income is taken from ABC Limited it is taken by a standard rate taxpayer in lieu of the higher rate of tax being paid by John or Tom.

−	~~'''Example B'''~~	+	= Changes implemented by the Finance Bill =

−	''~~The” UKBuilding LLP” makes~~ a ~~profit~~ of ~~£200,000~~ to ~~31<sup>st</sup> March 2013~~ and ~~has three members:''~~	+	HMRC are introducing revisions in the Finance Bill 2014 which will re-allocate 'excess' profits allocated to a non-individual member where the following conditions are met:
		+	*A non-individual has a share of the firm’s profit.
		+	*The non-individual’s share is excessive.
		+	*An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place, and;
		+	*It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.

−	~~''Tom, John, and “ABC limited” ''~~	+	These proposals will affect all mixed partnerships regardless of their rationale. Those that have a sound commercial basis for their structure will be affected just as those which exist for tax saving purposes alone.

−	~~''£80K~~ of ~~the profits~~ are ~~allocated equally to Tom and John (£40K each) and £120K to ABC Limited~~.''	+	It is likely that many LLPs will opt to incorporate, but for those LLPs for whom this in neither desirable nor a viable option the matter of profit allocation with effect from April 2014 will become fraught with adverse consequences if these new rules are triggered.

−	''In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.''	+	----

−	~~''So the total tax take is £68~~,~~400 in Example A but only £42,000 in Example B''~~	+	This article was written by:--[[User%3AMartinc\|Martinc]] 12:35, 20 February 2014 (UTC)

−	~~<br/>~~	+	= Find out more =
−		+
−	This simple analysis does not explain the whole story as further tax would be payable on income taken from ABC Limited either in the form of salary or dividends but in the event that no such income is taken or is deferred to a much later date, it is clear that there is a cash – flow detriment, at the very least, to the Exchequer. And, at worst, there is a clear loss to the Exchequer in the event that when income is taken from ABC Limited it is taken by a standard rate taxpayer in lieu of the higher rate of tax being paid by John or Tom.	+
−		+
−	~~So HMRC are introducing revisions in the Finance Bill 2014 which will re-allocate “excess” profits allocated to a non-individual member where the following conditions are met:~~	+
−	*A non-individual has a share of the firm’s profit.	+
−	*The non-individual’s share is excessive	+
−	*An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place, and	+
−	*It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.	+
−		+
−	These proposals will affect all mixed partnerships regardless of their rationale. Those that have a sound commercial basis for their structure will be affected just as those which exist for tax – saving purposes alone.	+
−		+
−	It is likely that many LLPs will opt to incorporate, but for those LLPs for whom this in neither desirable nor a viable option the matter of profit allocation with effect from April 2014 will become fraught with adverse consequences if these new rules are triggered.	+

−	~~This article was written by:--[[User:Martinc\|Martinc]] 12:35, 20 February 2014 (UTC)~~	+	=== Related articles on Designing Buildings Wiki ===
		+	*Business model.
		+	*Construction industry institutes and associations.
		+	*Construction organisation design.
		+	*IR35.
		+	*Joint venture.
		+	*Payroll companies.
		+	*Partnering and joint ventures.
		+	*Personal service company.
		+	*Types of construction organisations.
		+	*VAT

		+	[[Category:Other_legislation]]
	[[Category:Taxation]]		[[Category:Taxation]]
		+	[[Category:Cost_/_business_planning]]

Martinc: Created page with "
'''Mixed Partnerships and HMRC'''
Many professionals working in the design and construction sectors have established themselves as a Limited Liability Partnership (..."

2014-02-20T12:35:41Z

Created page with " '''Mixed Partnerships and HMRC''' Many professionals working in the design and construction sectors have established themselves as a Limited Liability Partnership (..."

New page

'''Mixed Partnerships and HMRC'''

 

Many professionals working in the design and construction sectors have established themselves as a Limited Liability Partnership (“LLP”) and some of these may well be “Mixed Partnerships”.

By this I mean that the members of a LLP are both corporate and individual members.

It is, of course, perfectly permissible for a company to be a member of a LLP and there are a variety of reasons why it may be considered appropriate or necessary for such an arrangement to be put in place. For example a corporate member could be the provider of much – needed capital to a LLP, or it could be a provider of very specific services to the LLP which could, in turn, be of benefit to the LLP’s own clients.

HMRC however, view the existence of Mixed Partnerships rather differently and believe that there is a significant loss to the Exchequer through the use of such arrangements to avoid or, at the very least defer, the payment of tax and national insurance contributions.

So, with effect from April 2014 new legislation is being implemented which will have significant financial repercussions for any LLPs which have corporate members. In particular the new rules will target those corporate members who are controlled by or associated with individual members and which are allocated profit shares that are deemed to be “excessive” by HMRC.

To understand this more fully a brief example is provided as follows:

'''Example A'''

''The” UKBuilding LLP” makes a profit of £200,000 to 31st March 2013 and has three members:''

''Tom, John, and “ABC limited” ''

''The profits are allocated equally to Tom and John (£100K each) and none to ABC Limited.''

''In this scenario Tom and John will both pay around £34,200 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance)''

'''Example B'''

''The” UKBuilding LLP” makes a profit of £200,000 to 31st March 2013 and has three members:''

''Tom, John, and “ABC limited” ''

''£80K of the profits are allocated equally to Tom and John (£40K each) and £120K to ABC Limited.''

''In this scenario Tom and John will both pay around £9,000 in tax and National Insurance (based upon 2013 tax year parameters, and assuming the single person’s tax free allowance), and ABC Limited will pay £24,000 in corporation tax, assuming no deductible expenses within ABC Limited.''

''So the total tax take is £68,400 in Example A but only £42,000 in Example B''

 

This simple analysis does not explain the whole story as further tax would be payable on income taken from ABC Limited either in the form of salary or dividends but in the event that no such income is taken or is deferred to a much later date, it is clear that there is a cash – flow detriment, at the very least, to the Exchequer. And, at worst, there is a clear loss to the Exchequer in the event that when income is taken from ABC Limited it is taken by a standard rate taxpayer in lieu of the higher rate of tax being paid by John or Tom.

So HMRC are introducing revisions in the Finance Bill 2014 which will re-allocate “excess” profits allocated to a non-individual member where the following conditions are met:
*A non-individual has a share of the firm’s profit.
*The non-individual’s share is excessive
*An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place, and
*It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.

These proposals will affect all mixed partnerships regardless of their rationale. Those that have a sound commercial basis for their structure will be affected just as those which exist for tax – saving purposes alone.

It is likely that many LLPs will opt to incorporate, but for those LLPs for whom this in neither desirable nor a viable option the matter of profit allocation with effect from April 2014 will become fraught with adverse consequences if these new rules are triggered.

This article was written by:--[[User:Martinc|Martinc]] 12:35, 20 February 2014 (UTC)

[[Category:Taxation]]