IR 35 and partnerships
My question is prompted by the latest FAQ (series 4 ) on the IR website concerning IR35. If a partnerships meets any of the three tests given the personal service company rules apply to it. If it meets none of the conditions the partners will not have to worry about the new rules.
Test 1 reads
- An individual, or persons connected with him or her, is entitled to 60% or more of the profits.
Well ICTA 1988, s 839(4) states that all partners are connected persons, so surely test 1 will be met by ALL partnerships.
Test 3 is pretty widely drawn as well:
- The profit sharing arrangements in the partnership provide for the income of any of the partners to be based on the amount of income generated by those partners through relevant engagements.
So if the partnership undertakes any relevant engagements and profits from those engagements are included in the total pool of income for profit sharing purposes, the partnership falls foul of the personal service company rules.
What do readers think?
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