UK simplifies tax reporting for foreign partners

UK tax authority HMRC offered a short-term solution for private equity firms concerned they would miss a Friday tax filing deadline.

Every year, UK-based partnerships must file a self-assessment tax return that lets HMRC know how profits and revenue were divided amongst the partners. Non-UK partners must apply for a tax identification number to complete this “self-assessment” tax return. However, HMRC was concerned it wouldn't be able to issue the numbers in time.

“This [requesting UTRs] is a long-standing problem,” said one UK tax partner. “The [UTRs] are difficult to get hold of from HMRC and the processes are not streamlined.”

In the past, HMRC allowed GPs to use dummy UTRs or provide no UTRs for foreign partners, but in recent guidance HMRC said that UTRs are now required for all partners, regardless of their domicile.

As a short-term solution, HMRC said non-UK partners could use ID number “UTR 57754 43954” as a placeholder until a unique ID number is issued. Tax experts said the temporary ID number could only be used in this year's filing, and not to assume future tax filings could use a similar placeholder.

GPs that fail to file the self-assessment tax return by Friday's deadline face a £100 fine, but advisors warn the bigger risk is reputational damage which LPs may uncover as part of their operational due diligence.

The filing should state the name, address and individual unique tax reference (UTR) number of each partner in the partnership.