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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
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Partnerships - general notes: partners’ personal expenses

The claim for relief for any expenditure incurred by a partner on behalf of the partnership must be included in the computation of the partnership’s business profits. It is not possible for individual partners to make personal claims, whether to expenses or capital allowances.

This is because revenue expenditure incurred by a partner only qualifies for relief if it is made wholly and exclusively for the purposes of the partnership business. And the only legal basis for giving relief for such expenditure is as a deduction in the calculation of the profits of the partnership business. See BIM37000 onwards for guidance on the ‘wholly and exclusively’ test.

Similarly the only legal basis for giving relief for expenditure qualifying for capital allowances is as a deduction in the calculation of the profits of the partnership business. The exception to this rule is where there is a formal leasing agreement between the partner and the partnership. In these circumstances the allowance is due against the partner’s leasing income.

This does not mean that expenditure incurred by a partner can only be relieved if it is included in the partnership accounts. You may accept adjustments for such expenditure in the tax computations included in the partnership return providing the adjustments are made before apportionment of the net profit between the partners.

You should not accept any deductions for expenses from the net profits allocated to a partner.