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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Example 1: Change in partners’ fractional sharing ratios


A and B carry on a business in partnership and hold equal interests in partnership assets.

The partnership’s assets include a freehold property that is included in the balance sheet at its acquisition cost of £500,000.

The CG base costs for A and B are:

A £500,000 x 50% = £250,000
B £500,000 x 50% = £250,000

The partners subsequently agree to change their interests in the property to:

A 40% and
B 60%

No consideration passes from B to A for the acquisition of a further 10% interest in the property.


Paragraph 4 of SP D12 applies to the calculation of the gain, see CG27500.

A is treated as having made a part disposal of his interest in the property.

The CG computation for A’s disposal of a 10% interest in the property will be:

  Partner A
Disposal consideration based on balance sheet value (BSV)  
£500,000 x 10%  
  Acquisition cost
£250,000 x 10%/50%  
    No gain/no loss

CG base costs to carry forward:

A £250,000 - £50,000 = £200,000
B £250,000 + £50,000 = £300,000

Note that B is treated as having acquired his additional 10% interest for an amount equal to the disposal consideration taken into account for A.