No payments before Christmas, former KWM partners told as tax wrangle rumbles on

Former King & Wood Mallesons (KWM) partners hoping to clear up lingering tax issues over the collapse of the firm's European arm will now not receive rebate payments before Christmas, as the drawn-out process continues to hit delays.

Ex-partners from the legacy SJ Berwin business received an email this week (12 October) stating that individual tax loss allocations – which can be used to offset the failed business’s losses against tax either owed or paid on individual earnings – will not be paid out by the end of the year, as had been expected.

The email from former KWM European managing partner Tim Bednall, seen by Legal Week, states that the previous timeframe for payments - which would have seen distributions made before Christmas this year - will now not be met, with payments now not expected until late February at the earliest.

Bednall's email states: "It has become evident that the process of calculating the individual UK income tax benefits will take more time. PwC, which represents the majority of former KWM partners, has completed this work for some but not all of its clients. We will not be able to meet our previous time frames for finalising this process.”

One former partner said: “It's disappointing, because we all now want to put this miserable business behind us forever.”

Former partners must now provide details of their actual UK income tax benefits received or to be received as a result of the allocation of tax losses by 15 December, with loss allocations set to be approved a month later. Distributions will then be made by the end of February next year.

Bednall also stated he expects to hear from HMRC by the end of this month regarding an appeal he made against late filing penalties, after the tax department sent penalty notices to former partners.

In the email, he states: "Deloitte provided a helpful letter explaining why the tax return was filed late, which accompanied the request for review. I expect to receive a response from the HMRC review process by the end of November."

The delay is the latest in a string of setbacks in allocating the losses, which had to be re-calculated earlier this year following a series of mistakes.

KWM’s Europe, UK and Middle East arm filed for administration in January last year after years of turbulence, late profit distributions and partner exits. The China firm maintained a small presence in London and Europe, registered as KWM Europe LLP.

Earlier this year it named litigation partner Darren Roiser as its new London office managing partner and moved into new headquarters in London.

Bednall declined to comment. KWM did not respond to requests for comment.