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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Goodwill: partnerships

CG27000 provides guidance on the special rules that apply in relation to the capital gains treatment of partnerships.

Statement of Practice D12, see CG27150+, explains that each partner is treated as owning a fractional share in the partnership’s chargeable assets. The amount of a partner’s fractional share will normally be determined by reference to the terms of the partnership agreement or, in the absence of such an agreement between the partners, the rules in Section 24 (1) Partnership Act 1890, see CG27220.

Where a partner’s fractional share changes, for example when a partner leaves or a new partner joins the partnership, a partner whose share decreases will be treated as having disposed of an interest in the partnership’s chargeable assets, including goodwill, equal to the reduction in his fractional share. CG27500+ explains how any gains or losses arising on such disposals should be calculated. For transactions occurring on or after 6 April 1988 see CG28100+.

Gains or losses arising on disposals of fractional shares in goodwill by non-corporate partners should be dealt with in accordance with the rules applying in relation to Capital Gains Tax. Gains or losses arising on disposals of fractional interests in goodwill by corporate partners should be dealt with in accordance with the rules applying in relation to Corporation Tax on chargeable gains.