Jurisdiction(s):
United Kingdom

UK mixed member partnerships: anti-avoidance rules on excess profit and loss allocations, HMRC guidance, key cases (Walewski; Boston Consulting Group), practical implications and AIFM interaction

Published by a LexisNexis Tax expert

Practice notes

This Practice Note explains the anti-avoidance rules relating to ‘mixed member partnerships’, ie partnerships with a mix of individual and non-individual partners.

‘Mixed member partnerships’ are those with both individual and non-individual members, the latter being, for instance, a company or an individual serving as a trustee. Such a firm may take the form of a general partnership, a limited partnership, or a limited liability partnership (LLP). In the ordinary course, both profits and losses are allocated in accordance with the profit-sharing terms agreed by the partners. Arrangements can nevertheless be crafted to take advantage of the fact that individuals typically face higher tax rates than other entities. A common approach is for the individual partners to form a company to join as a corporate partner. The individuals then occupy two positions: partners in the firm and shareholders in the company. In a profitable period, a greater proportion of profits would be directed to the company to benefit from the lower corporation tax rate versus income tax. The partners keep their economic interest through owning the company and could, for example, draw the profits later as dividends in a quieter year. The mixed member partnership rules are aimed to counteract...

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Web page updated on 22/05/2026

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