The penalties of partnership conflict
Most farming operations trade through the legal entity of a partnership. It has also been said that a starting point for the understanding of acting for farmers is that “all farming families hate each other”. Therefore it is quite possible, and indeed
frequent, that individual partners disagree on the treatment of accounts and tax issues with the partnership. There have been a number of recent tribunal cases that have helped give guidance towards the depth of the farming partnership conflict and the correct tax treatment.
Definition of partnership property
A recent case regarding the defining of partnership property flags up the need for all advisers to be careful with regard to partnership property assumptions and the need for clear legal definition. The case is Ham v Bell  EWHC 1791 (Ch) which came before the High Court with regard to whether the farm, which had been an asset of the old partnership of Mr and Mrs Ham senior, became an asset of the new partnership with their son.
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The key to deciding whether it was partnership property was what Mr & Mrs Ham, the original owners of the farm, had intended. It was decided that accounts are no more than evidence and if they do not reflect what was agreed they could be disregarded. This shows the need for accountants to ensure that the accounts reflect what was agreed. If necessary the professional should suggest clients take legal advice in this respect.
Action plan for partners
It can be argued that in Ham the individuals must have a separate adviser who would have been able to check and advise on all such matters. Advisers acting for the partnership should ensure (where there is any doubt) that all partners receive details of draft accounts, queries and are kept updated as to filing deadlines. Likewise, they must understand the legal ownership of partnership property.
Where there is any dispute within a partnership, separate advisers for each of the partners should be considered at an early stage.
Where the adviser acts for, say, the partnership and the lead adviser, who is perhaps not allowing full access to the information by all the partners, they should of course consider their position with regard to the very important position of independence.
Recent cases, eg King (R King and Others TC5163) and Porter (Porter v The Commissioner for Revenue and Customs  UK FTT 401) show the complexity and the importance (some would argue, stress) of the compliance issues surrounding partnership accounts and tax returns in addition to ensuring they reflect what the partners agree.
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