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HMRC internal manual

Company Taxation Manual

Particular topics: companies in partnership: different classes of partner

 

The three-stage approach set out CTM36510 also applies where it is necessary to calculate and apportion profits where different classes of member are to be taxed by reference to different rules.

Example

A UK partnership has two corporate members; Company A - a UK resident, and Company B - non-resident.  Profits are shared equally.  The partnership’s worldwide profits chargeable as trading income amount to £10,000 of which £7,500 is earned in the UK.

Computation for UK resident member

Step 1  Calculate the profits as if all the members were UK resident companies:

Profit £10,000.

Step 2  Allocate that profit between all the members:

Company A £5,000.

Company B £5,000.

Step 3  Assess Company A on its share of that profit:

£5,000.

Computation for non-resident member

Step 1  Calculate the profits as if all the members were non-resident companies:

Profit £7,500.

Step 2  Allocate that profit between all the members:

Company A £3,750.

Company B £3,750.

Step 3  Assess Company B on its share of that profit:

£3,750.