Fail to File… Fine? – Changes to Partnership Penalties

Until recently, it was simply to be expected that partners who failed to produce a partnership return in time to HMRC would face a fine. However, the First-tier Tribunal has now reduced penalties for a case where the same information required was already submitted, within the partners’ own separate self-assessments.

It is worth noting that although agreeing there was no excuse for the partnership return to be submitted late, the Tribunal refuted HMRC’s claim that there were no “special circumstances” allowing a reduction of the penalties. After referring to both the Taxes Management Act 1970 and the Finance Act 2009, it was held that as HMRC had in fact already received the relevant information – on time no less – in the individual self-assessments. The court heard that the circumstances were therefore “special” and the proposed penalty was written off.

Further debate or even appeal may be inevitable. Questions are already arising as to whether partnership returns will continue to be a requirement when the information is given already, albeit in a different or separate form. In this particular case the partnership was simple; two partners, who were spouses and shared all profits 50:50. Applying this as a precedent to larger scale partnerships, with varying profit sharing structures could prove to be a challenge for HMRC.

With this is mind it may be most advisable to err on the side of caution and ensure that all partnership income is presented correctly and promptly, in both partnership returns and self-assessments alike. If you have any queries relating to this article or partnership law more generally, please contact Jennifer Bell via jennifer.bell@forbessolicitors.co.uk or on 0333 207 1130.

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