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HMRC internal manual

Business Income Manual

Partnerships - general notes: sharing profits/losses

S19, S24 Partnership Act 1890

Profits, losses or other income may be shared as the partners may mutually agree from time to time. The sharing ratio need not be in proportion to contributions of effort or capital. It is not necessary for the partners to share profits and losses in the same proportions, nor income from other sources in the same proportions as trading or professional income. A partner’s share of the income on which they are chargeable to tax is computed according to their entitlement in the partnership’s period of account.

The allocation of profits or losses for a period of account cannot be varied retrospectively after the end of that accounting period - see Bucks v Bowers [1969] 46TC267.

Where, in a partnership including a corporate partner, it appears that consideration may have passed between partners for a share of the profit or loss, you should consider whether the anti-avoidance legislation which counters the transfer of relief within partnerships applies - see CTM36590.