In Nicholas Walewski v HMRC [2021] UKUT0133, the Upper Tribunal (UT) confirmed the operation of the Mixed Memberships rules. It attributed the Limited Liability Partnership (LLP) profits of a corporate member to an individual member for tax purposes after it agreed with the First Tier Tribunal (FTT) that he had the power to enjoy them through a trust created for his children.

This was an appeal against the decision in Nicholas Walewski v HMRC [2020] TC7554.

Mr W appealed to the UT who dismissed his grounds of appeal.


Given the grounds of appeal, the appellant seemed to have accepted that the rules applied but was trying to argue that the amounts he was taxed on should be reduced. It is important to remember that the Mixed-Member Partnership rules are a tax adjustment and do not reflect the cash movements.

There are relieving provisions for any onward distribution by the corporate member to the individual that has been taxed on those profits. To prevent a large dry tax charge, one would hope that the appellant's structure does not prevent him from obtaining that relief.

Useful guides on this topic

Mixed members: partnerships with company members
The partnership mixed-member rules are anti-avoidance provisions that aim to prevent individual partners from allocating profits from themselves via corporate structures.

Mixed partnerships: profits were enjoyed by individual not companies
In Nicholas Walewski v HMRC [2020] TC7554, the First Tier Tribunal dismissed an appeal against a reallocation of the profits of mixed-member LLPs to an individual partner. There was no evidence the profit allocations were for any reason other than the individual’s power to enjoy them.

Partnerships: How to prepare partnership and partners tax returns
How to prepare partnership returns. How are partnership profits calculated? How are corporate members of partnerships taxed? What are the differences between the tax treatment of individual and corporate partners? Are there anti-avoidance provisions to consider?

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

Nicholas Walewski v HMRC [2021] UKUT0133

Oak ad
Are you enjoying our content? 

Thousands of accountants and advisers and their clients use as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.