The key issues to be tackled by the legislation include clarification of who is the partner chargeable to tax; business structures that include partnerships as partners; investment income - tax administration; trading and property income - tax administration; and allocation and calculation of partnership profit.

Partnerships are not taxed on their profits; instead individual partners are chargeable to income tax on their share of the partnership profits and to capital gains tax on their gains in respect of partnership assets. Corporate partners are chargeable to corporation tax on their share of profits and chargeable gains.

The move will ‘ensure profit allocations to partners are fairly calculated for tax purposes’, the Treasury said in a tax updates document accompanying the Autumn Statement. Draft legislation will follow on 5 December.

The object of the proposals, the government said, is to remove uncertainty by making the calculation and reporting of partnership profits clearer for taxpayers.

‘To treat someone as a partner on the basis of names included in a return, and to say that profit shares are in the first instance to be derived from the partnership agreement, does not necessarily advance matters, and if the latter ignores other relevant material may produce a wrong result,' said Wolters Kluwer UK specialist tax writer Mark Cawthron.

‘Such an approach could even, perhaps, be turned round and used for manipulation or avoidance.’