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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Partnerships - computation and assessment: individual, company and non-resident members

S849 Income Tax (Trading and Other Income) Act 2005, S1259 Corporation Tax Act 2009

Where one or more of the partners is a company the rules at CTM36500 onwards apply to the corporate partners. In the case of a mixed partnership consisting of members who are companies and individuals the share of partnership profits allocated to corporate partners must be computed using the Corporation Tax rules and the share of partnership profits allocated to individuals must be computed using the Income Tax rules. In such a case the partnership should submit two sets of computations.

Similarly, where one or more of the partners is a non-resident individual then the share of profits allocated to any such partner must be computed as if the partnership were a non-UK resident individual. In such a case the partnership may need to submit an additional set of computations.

Example

Mr Armstrong, a UK resident, and Mrs Beeton, a non-resident, are in partnership. The partnership’s world-wide trade profits amount to £10,000 and included in that sum is its UK profit of £7,500. Partnership profits are shared equally. Two tax computations are required on the following lines

Computation for resident partner

Step 1 Trade profits   £10,000
       
Step 2 Allocation Mr Armstrong £5,000
    Mrs Beeton £5,000
Step 3 Profit taxable on Mr Armstrong £5,000

Computation for non-resident partner

Step 1 Trade profits   £7,500
       
Step 2 Allocation Mr Armstrong £3,750
    Mrs Beeton £3,750
Step 3 Profit taxable on Mrs Beeton £3,750