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HMRC internal manual

Capital Gains Manual

Effects of residence/domicile: partnerships

Chargeable gains which accrue to partners on disposal of partnership assets are assessed and charged on the partners separately, and not on the partnership. Consistent with this, any dealings by the partnership are treated as dealings by the partners, and not by the partnership. (TCGA92/S59).

You will therefore have to determine the location of any assets disposed of by partners in the normal way (see CG12400+).

Once a partner’s gain or loss has been computed on this basis it will be necessary to consider their residence, ordinary residence* and whether they are taxed on the remittance basis (a question which is itself linked to their territory of domicile) in order to decide whether or when the gain is taxable or loss allowable. For guidance on the remittance basis, see CG25300+.

A special rule applies where a partnership’s chargeable gains are relieved from capital gains tax in the UK under a double taxation agreement. If the partnership is resident outside the UK, or carries on a trade, profession or business which is controlled or managed outside the UK, then the relief available under the agreement is not to affect the liability of any UK resident partner’s share of the partnership’s capital gains. For this purpose a member of a partnership includes a person entitled to a share of the partnership’s capital gains. (TCGA92/S59 subsections (2), (3) and (4)).

For guidance on partnerships and chargeable gains, see CG27000.

A Statutory Residence Test for individuals was introduced for years from 6/4/2013.

  • In addition for 2013/14 and later years, ordinary residence no longer needs to be considered.

Guidance on the Statutory Residence Test can be found in the RDR3 Guidance Note: Statutory Residence Test (SRT).