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Time to retire
Key points
- The retirement date can be key from a tax perspective.
- The interaction of overlap relief and foreign tax credit can lead to a total loss of relief or a reduction in the rate at which relief is available.
- It is important to review the situation when a partner’s earnings decrease in the years before retirement.
- Partnerships may make a tax reserve against earnings.
- Do not overlook the tax-efficient use of personal allowances pension and other tax reliefs.
The timing of a partner’s retirement from a partnership – either limited liability or general – can give rise to unexpected tax consequences in particular for partnerships with a 30 April year end.
Partners leaving a firm close to the end of their career may be encouraged to retire at the end of a financial year to keep matters as simple as possible from an accounting point of view. However such an approach may not...
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