Does anyone have ideas to reduce partners' tax liabilities? The LLP has a tax reserve account in place of 40% of partners' gross drawings so they are keen to maximise their net income.
For example, some of the partners pay for large train season tickets to and from work and wish to buy ipads/computers for their home offices.
They wish to deduct these personal expenses (not put through the LLP) from their personal tax liabilities somehow. Although travel costs to and from the office are not deductible, could the costs be financed by loans in a tax efficient manner?
Any suggestions would be most welcome...
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Partners expenses claims
A partner cannot claim expenses independently of the partnership return. Nor would 40% of drawings necessarily bear any resemblance to the actual tax liability which relates to profits arising.
What year end does your partnership have?
A schedule of expenses met privately for each partner can be, by agreement with the other partners amalgamated into the relevant partnership return as if the expense has been met by the partnership.
Any such expenses are taken into account (if allowable of course) when reaching the partnership share to be included on the individuals personal return.
Season tickets to and from work definitely sound like disallowable commuting so would not affect the liability. As the purchase is disallowable any loan interest would also be disallowable. Loans from the partnership would also need to be carefully considered as I would be concerned that they could lead to a disallowance of any finance costs within the partnership on the grounds that it was financing personal as opposed to business expenditure.