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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Statement of practice D12: summary

TCGA92/S59 and TCGA92/S59A provide that any partnership dealings in chargeable assets shall be treated as dealings by the partners. This means that gains are chargeable on the partners not on the partnership.

SP D12 explains that partners are treated as owning fractional interests in partnership assets, see CG27200+ and that a change in a partner’s fractional interest in a partnership asset will be an occasion of a disposal if his fractional interest is reduced or as an acquisition if his fractional interest is increased.

The effect of the rules is that there is a disposal for CG purposes when either:

  • the partnership disposes of an asset or
  • one or more of the partners’ fractional interests in a partnership asset is/are reduced.

When the partnership disposes of an asset all of the partners are treated as disposing of their fractional interests in that asset.

When there is a change in the partners’ sharing ratios any partners whose fractional interests in an asset are reduced are treated as disposing of an interest in the asset equivalent to the amount of the reduction.

For guidance on how SP D12 applies when:

  • a partnership disposes of an asset, see CG27350
  • partnership assets are distributed in kind to one or more of the partners, see CG27400
  • a partner’s fractional interest in a partnership asset changes, see CG27500+
  • a new partner is admitted or an existing partner leaves the partnership, see CG27600+
  • two or more partnerships merge, see CG27700+
  • there is a transaction between partners who are connected persons other than by virtue of the partnership or the transaction is other than at arm’s length, see CG27800
  • an annuity is paid to a retired partner, see CG28400+.