A partner who withdraws from a general partnership (VOF) remains liable for any tax debts owed by the VOF that relate to the period during which he was a partner in the VOF.
Director
This is discussed in a case in which the Supreme Court recently ruled. The partner in this case withdrew from the general partnership in October 2016, with effect from 31 May 2016. The general partnership failed to pay the tax due on the basis of the VAT return for the first quarter of 2016 and consequently received a supplementary assessment. The tax inspector held the former partner liable for payment of this additional assessment. This was done on the basis of the provisions in the Recovery Act statutory director’s liability, under which a partner with full liability in a partnership or general partnership (VOF) is deemed to be a director.
The Supreme Court confirms that this is in accordance with the applicable legislation, as the additional tax assessment relates to a period during which he was a partner in the general partnership. The former partner has failed to demonstrate that the non-payment of the tax was not attributable to him.
Interest and charges
In the additional tax assessment, the Tax and Customs Administration included not only VAT but also tax interest, and recovery costs and recovery interest were calculated on the unpaid VAT. The Supreme Court ruled that, with regard to these additional costs, the former partner is not required to prove that the failure to pay the tax was not his fault. The burden of proof lies with the Tax and Customs Administration, which must demonstrate that the liability for these amounts is attributable to the former partner. The Court of Appeal had not correctly applied this rule of evidence.