We act for a very active professional practice which is growing, and has partners leaving and joining fairly frequently as a result of growth. The implications of the requirement to value work in progress and spread the tax consequences over ten years are far reaching, and very difficult to see a solution which will be equitable to all partners.
Do you have any advice please?
Lyn Kendry
Replies (2)
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The essential difficulty is that the partners who are credited with the upward revaluation for accounting purposes will not necssarily be the same as those who pay tax on it over the next 10 years. So the solution was to credit the revaluation surplus net of tax and release the tax provision ove the next ten years to those partners being taxed on the catch-up charge. That I imagine is what Mark is recommending.
But how you deal with it now if the revaluation was originally credited gross, and you don't have a tax provision to release, is a different matter.