BIM72070 - Partnerships - general notes: Service companies

Some partnerships may use service companies for avoidance purposes, particularly because of the better tax-deductible pension provisions that can be made for directors.

There is no objection to the setting up of service companies as such. But you should not accept that a service company can employ the partners as directors to provide normal professional services for the partnership. Where the service company provides office accommodation and clerical services the charges to the partnership should not be at more than their cost plus a modest uplift.

You may obtain further guidance from Business Tax (Technical) if a reasonable settlement cannot be reached.