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HMRC internal manual

Business Income Manual

Partnerships - computation and assessment: not a separate entity for tax purposes

S848 Income Tax (Trading and Other Income) Act 2005, S1258 Corporation Tax Act 2009

For the purpose of charging the profit made by a business carried on in partnership to Income Tax or Corporation Tax, a partnership is not regarded as an entity separate and distinct from the partners.

This is the case even where the partnership, as in Scotland, does in law have legal personality. But for the purposes of taxing third party (agency) income, a partnership is treated as a separate entity.

However, some legal obligations and rights remain with the partnership. For instance although Income Tax and Corporation Tax are charged on each partner separately rather than on the partnership, the partnership is still required to make a return of partnership income and an allocation of that income between each partner. Further, the partnership is required to make PAYE and subcontractor returns and is liable for the tax due in respect of the payments it makes as employer or contractor.