The vast majority of professional practices that operate through the medium of a partnership have at least one service company subsidiary. This might be a legacy from the days of profit related pay or more recent structuring, perhaps coming out of the transfer pricing compensation adjustments legislation.\u00a0 Whatever the reason many professional practices have their staff employed by a legal entity other than the main partnership.\u00a0 Although tax efficiency could accrue (that is until Finance Act 2014!) the structuring came at a compliance cost.\u00a0 Most firms found the compliance cost was a trifle compared to the benefits received.\u00a0 The VAT side of HMRC may be found to be a further cost, for both the present and the past.<\/p>\n
Presently Customs are routinely reviewing cases where the input VAT on staff entertaining has been recovered by the main partnership. The logic being that staff entertaining is recoverable.\u00a0 HMRC are countering this by considering the legal form and highlighting where the main partnership doesn\u2019t have any staff and therefore can\u2019t recover staff entertaining.\u00a0 For the present this is a simple matter to correct.\u00a0 Either the supplier can invoice the service company or the main partnership recharge down to the service company.\u00a0 However it is not so easy to get these things done retrospectively.\u00a0 With HMRC able to review back a number a years therein lies the possible additional compliance cost.<\/p>\n","protected":false},"excerpt":{"rendered":"
The vast majority of professional practices that operate through the medium of a partnership have at least one service company subsidiary. This might be a legacy from the days of profit related pay or more recent structuring, perhaps coming out of the transfer pricing compensation adjustments legislation.\u00a0 Whatever the reason many professional practices have their[…] <\/p>\n