Partnerships play a crucial role in the UK’s business landscape as they offer shared responsibilities and flexibility among members and are often a blend of individual and corporate members (i.e., a company is a member).
HMRC confirmed in early 2024 that partnerships with corporate partners (also known as mixed partnerships) are now able to claim capital allowances which have previously only been available to companies within the charge to Corporation Tax. The capital allowances are first year allowances such as full expensing.
Full expensing allows companies (and partnerships with corporate members) to immediately deduct the entire cost of qualifying capital expenditures from their taxable income, in the year of purchase. This contrasts with traditional capital allowance methods, where the cost is spread out over several years. For partnerships with corporate members, investments in assets, such as machinery, equipment, or vehicles, can result in receiving tax relief (at up to 25%) on these investments immediately, which can alleviate the cash flow issues of investment. Consequently, more funds become available for reinvestment in the business or distribution to partners.
In conclusion, partnerships with corporate members in the UK stand to benefit significantly from full expensing.
Tax implications
The implications of these tax incentives are extensive for partnerships. By encouraging investment in critical assets, the Government aims to foster business growth and competitiveness. For partnerships with corporate members, these incentives translate into enhanced financial performance and increased flexibility in capital allocation. With reduced cash flow constraints, partnerships have the opportunity to invest in innovation, expansion, or infrastructure improvements, all of which can contribute to long-term success.
However, to fully capitalise on these incentives, partnerships must ensure compliance with relevant tax regulations. This involves accurately identifying qualifying capital expenditures, maintaining thorough records, and adhering to reporting requirements set by HMRC legislation. Given the complexity of tax planning, partnerships may benefit from seeking guidance from tax professionals or accountants to navigate the intricacies of these incentives and optimise their tax strategy.
In conclusion, partnerships with corporate members in the UK stand to benefit significantly from full expensing and super-deductions. These tax incentives provide valuable opportunities for partnerships to enhance their financial position, drive investment, and contribute to economic growth. By leveraging these incentives effectively and ensuring compliance with regulatory requirements, partnerships can position themselves for sustained success in an increasingly competitive business environment.
For advice on these issues and capital allowances for partnerships generally, please contact Kiran Chotai, Private Client Senior Manager.
