NEW proposals to apply a 'strike off' procedure to agricultural limited partnerships which do not comply with annual admin requirements could catch out legitimate businesses.

The new proposals are part of the UK Government’s commitment to prevent the misuse of partnership law, and improve the transparency of those who own and control UK companies.

NFU Scotland this week expressed concern that there is a lack of understanding within the industry about the new requirements, and the potential penalties for non-compliance.

Limited Partnerships are commonly used within agricultural business in Scotland due to their tax efficient nature. However, prior to 2003 they were also used as a tenancy option, and there are around 500 such agreements still in operation.

Such tenancies were traditionally used to avoid granting full ‘secure’ tenancies – the landlord (limited partner) entered into a limited partnership with the tenant (general partner), and then granted a lease to the limited partnership. As such, limited liability was granted to the landlord, with the tenant being liable for the debts and obligations of the limited partnership.

In response to the Government's moves, NFUS has reiterated that it does not believe, and has seen no evidence to suggest, that agricultural limited partnerships have been used as vehicles for any form of criminality.

Legal and technical policy manager, Gemma Cooper commented: “Limited Partnerships have operated with agriculture for some time. They are attractive because of the tax advantages that they provide, as partners are taxed only on the profits arising from the limited partnership.

“The union has concerns regarding the unintended consequences for agricultural tenancies of this proposal. More specifically, to the proposal for ‘non-operating strike-off’, whereby a limited partnership’s failure to deliver a confirmation statement would lead to the Registrars’ belief that the partnership is not in operation. The consequences of this could be the limited partnership losing limited liability, something we believe could lead to the potential for legal claims and European Convention on Human Rights issues."