FYAs in mixed partnerships

FYAs in mixed partnerships

Didn't find your answer?

My clients are a partnership comprising 3 individuals and a limited company. The company is owned by two of the partners and was set up some years ago by our predecessors to mop up retirement relief. Just after we took over the clients a tax enquiry opened into the last returns our predecessors did!

In the course of the enquiry, the Inspector has spotted that the partnership claimed substantial 100% FYAs on new IT equipment. Quoting an item in Taxation (page 431, 3 Feb 2005) he says that CAA 2001 s 48(2) denies FYAs to a partnership which includes a company. My reading of this suggests he is correct, and so some £100,000 of capital expenditure now qualifies only for 25% WDA, not 100% FYA.

It is interesting that this issue only came up over 2 years into the enquiry, and only when the Inspector had passed his file up to someone else for review! Also interesting that a recent CCH e-CPD topic in Nov 2005 was 'Partnerships involving companies ' tax treatment' ' which makes no mention of this FYA issue, despite it apparently being one of the few pieces of tax legislation which addresses this area specifically!

Q1. Is this correct? We have referred the point back to the previous advisers, who worked with tax consultants to set up the partnership, and they say there are "technical arguments" against the Revenue's interpretation of s. 48(2), but they won't share them with us as they have cases with the Revenue on this issue at the moment. Is anyone else trying to contest this area?

Q2. Whilst ignorance of the law is no defence, etc etc, if the Revenue are correct, do we have a worthwhile moral case for arguing against interest and penalties since it appears that this problem was only 'recently' publicized by the Revenue, according to the Taxation article?
Nigel Harris

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.