The Upper Tribunal has found that corporation tax rules taxing partners on their share of partnership profits are not subject to the general rule that a company is not taxable on profits that accrue to it as a fiduciary. As a result, the taxpayer was taxable on its share of partnership profits even though it had contributed that share to another partnership. Recent statutory changes can mitigate this outcome but do not cover all eventualities. In addition, these twin appeals confirm that non-resident corporate partners cannot get tax relief for borrowings taken out to acquire a partnership interest; and that the miscellaneous income charge has broad application in the context of deferred remuneration arrangements for individual partners.
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The Upper Tribunal has found that corporation tax rules taxing partners on their share of partnership profits are not subject to the general rule that a company is not taxable on profits that accrue to it as a fiduciary. As a result, the taxpayer was taxable on its share of partnership profits even though it had contributed that share to another partnership. Recent statutory changes can mitigate this outcome but do not cover all eventualities. In addition, these twin appeals confirm that non-resident corporate partners cannot get tax relief for borrowings taken out to acquire a partnership interest; and that the miscellaneous income charge has broad application in the context of deferred remuneration arrangements for individual partners.
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