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HMRC internal manual

Business Income Manual

Partnership expenses - partnership advances funds to partner

The fact that the partnership provides money to enable the partner to make a payment does not make it an expense of the partnership.



Mark is being sued for a debt of a business she used to be involved in. She is warned that she may be made bankrupt.

Mark is a key member of the AAA LLP, but would be forced to resign if make bankrupt.

Mark makes a compromise deal with the creditors. As she is important to the business, the other members of the AAA LLP agree that the AAA LLP will loan her a sum of money to help her pay off the creditors.

This is not an expense of the business, but Mark’s personal expense. The AAA LLP may have lent her the money but it has not been agreed that it is an expense of the partnership.


If AAA LLP had in fact paid the expense outright for Mark, it would still need to be considered whether the expense was allowable as a deduction against profit under ordinary principles, including whether the expense was incurred wholly and exclusively for the partnership business or whether viewed realistically it amounted to an allocation of profit to Mark. For further guidance on this, see BIM82075 and BIM38100.