23 July 2013

The Office of Tax Simplification ('OTS') is to carry out an initial review of partnership taxation by Autumn 2013.


The current tax rules applicable to partnerships are widely seen as being less than satisfactory.  There is no cohesive or comprehensive set of rules applying to partnership taxation; instead, the rules are fragmented and, in some cases, heavily reliant upon HMRC published practice.  

Although partnerships are generally treated as transparent for tax purposes, administrative complexity can arise, for example, as regards how income is taxed or as a result of the need for returns at both the partnership and partner levels.

It is also questionable whether the tax rules have adapted particularly well to the different ways partnerships, and different types of partnerships, are used in the modern world.  The terms of reference for the OTS also highlight the use of partnerships in tax avoidance.  

Current Government consultations, including on proposed new anti-avoidance rules for partnerships or as regards modernising the corporate debt rules, acknowledge some of the issues mentioned above, at least in particular areas, but do not envisage wholesale change.  

The Review

The OTS will consider the existing tax rules and HMRC guidance, how partnership taxation is administered, and it will seek to identify areas which are particularly burdensome for partnerships.  The treatment of limited liability partnerships (LLPs), which are bodies corporate but generally taxed as partnerships, is singled out for specific attention.  The OTS review does not, however, bind the Government to any course of action.  


A general review of partnership taxation is to be welcomed, especially if it results in clarification of what is a piecemeal and confusing area of tax law.  

If you have any queries please contact Ian Carnochan.

Key contact

Ian Carnochan

Ian Carnochan Partner

  • Tax
  • Corporate Tax
  • Real Estate Tax

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