The long awaited legislation on changes to partnership taxation has been published. There are two broad categories of changes. The first concerns the profit sharing arrangements between partners, whereby the proposed changes ensure the allocation of partners’ profits for tax purposes must be in proportion to the ‘partner’s percentage’ of the profits. The second category deals with reporting requirements and who is to be treated as the partner in various circumstances, including partnership interests held on a bare trust and tiers of partnerships. It is particularly positive that HMRC has clearly listened to tax professionals and industry in pulling back from the most damaging suggested changes, leaving a package of measures that is not entirely unwelcome. Partnerships will, however, have to look carefully at their profit sharing provisions and the information they hold on their partners to ensure that this holds true in each case.
