Partnership tax filing – lessons from the tax tribunal
If you’re in a partnership, who is responsible for filing the partnership tax return? A recent First Tier Tax Tribunal (FTT) case has highlighted not just worrying HMRC practice, but also the need for clarity.
Mrs L is a partner in a two-partner business. HMRC had charged her penalties for failure to file a partnership tax return for the 2015/16 tax year. The other partner, Mr F, did not receive any penalty notices. HMRC said that Mrs L was the “representative partner” for the business who was required under statute to deliver the relevant tax return.
There are two definitions in the relevant legislation as to how a return can be notified:
- A notice to “the partners” already identified to file; or
- A notice to “any partners”.
Since HMRC sent the notices to the business’s address rather than the personal address of Mrs L, the judge in the case felt the notice was given under the second definition. That is, any partner at the business could have fulfilled the requirement.
More pertinently for HMRC, the judge cancelled the penalty orders after reviewing what he believed to be an inadequate train of evidence from the Revenue, who had not only failed to keep adequate records of what had been sent and to whom, but had also sent the wrong letter to Mrs L and not pursued the other partner at any time.
While the individuals and business in this case were lucky to come before a rigorous judge, partners need to be aware of the responsibilities each must ensure they comply with on the tax filing rules. One of the issues raised in the case was why one partner had been pursued over another. It transpired that Mrs L was already registered for self-assessment and had a unique taxpayer reference (UTR) number, while her partner did not. This meant it was simpler for HMRC to find and fine her.
A partnership return must be filed, regardless of whose name is on the notices. If a named partner is unable to comply, for whatever reason, the notice should not be set aside until they are able to deal with it. HMRC should have pursued both partners for the return in this case and should have been able to produce the proper notifications when required.
The simplest way to avoid becoming embroiled with either HMRC or tribunals, however, is to be clear within your partnership about how to manage such events. We will be happy to assist you in this process.
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