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Mixed partnership rules applied to a partner on profits allocated to a company

By Mark McLaughlin, September 2021

The appellant was liable to tax under the ‘mixed partnership’ rules on allocations of profits to a company from two partnerships as the allocations exceeded an appropriate notional profit, and the appellant had the power to enjoy the company’s profit share.  

In July 2005, the appellant set up an equity fund (a Luxembourg open-ended vehicle), which was managed by a limited liability partnership (LLP) (AAM) in the UK. Trade execution was carried out by another LLP (AF). 

The appellant was a partner in AAM and AF. He set up a company (W Ltd) in June 2006, which was a partner of AAM and AF. He became an employee of W Ltd on 1 April 2007. The shares in W Ltd were held by an offshore company. Shares in that company were held by a trust in which the appellant’s children were beneficiaries. 

During the tax year 2014/15, the appellant retired as a partner from

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