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HMRC internal manual

Business Income Manual

Partnerships - general notes: definition

S1(1), S45 Partnership Act 1890, Sch1 Interpretation Act 1978

A partnership is defined as ‘the relation which subsists between persons carrying on a business in common with a view of profit’.

‘Persons’ includes artificial as well as natural persons, so an individual, a body corporate or the trustee of a settlement may all be partners. In England, Wales or Northern Ireland a partnership is not in law a legal person; so one partnership cannot become a member of another partnership, though the members may do so. For the position of partnerships in Scotland, see BIM82035.

You should note that a partnership, although it may not be a legal person, is still a ‘person’ for all purposes of the Taxes Acts unless the contrary intention appears because a ‘person’ includes ‘a body of persons corporate or unincorporate’ and a partnership is a body of persons unincorporate.

‘Business’ is defined as including ‘every trade, occupation or profession’. So ‘business’ is a very wide term, embracing almost every commercial activity, and is much wider than trade or profession alone. It includes a business of making investments. Simply making an investment is not enough, there has to be sufficient organisation, continuity to make the activity a business.

The expression ‘with a view of profit’ distinguishes partnerships from clubs and societies which do not have a profit seeking motive, and also from arrangements only to share expenditure, where each person keeps their own income, for example some dentists or medical practitioners with joint surgeries, or some crop-sharing agreements.

Partnership is a relationship resulting from a contract or agreement, oral or written. The implementation of that agreement creates the partnership relationship. If it is not implemented, it is not effective (Dickenson v Gross [1927] 11TC614).

There is no limit on the number of partners a partnership may have.