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Taking an interest in partnerships: examining BCG v HMRC

David Haworth and David Haughey (Freshfields Bruckhaus Deringer) review the implications of the FTT’s decision for those advising on partnership equity/incentivisation arrangements or on mixed member partnership arrangements.

One attraction of conducting business through a partnership (or LLP) is the flexibility which partnership law affords businesses to adopt bespoke arrangements which meet their commercial needs. However that flexibility can give rise to complex questions regarding the taxation of those participating in those arrangements.

The recent First-tier Tribunal (FTT) decision in The Boston Consulting Group UK LLP & others v HMRC [2024] UKFTT 84 in which the authors’ firm acted for the appellants illustrates some of those complexities. That case concerned the tax treatment of certain ‘capital interests’ held by the individual members of a large LLP conducting the UK business of a global management consultancy firm. Broadly individual members acquired those interests on becoming members and...

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