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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: Aggregate Levy (AL): Who is liable? Partners and partnerships

Partnerships may register in their own right for AL.

Section 9 of the Partnership Act 1890, provides:

“Every partner in a firm is liable jointly with the other partners, and in Scotland severally also for all debts and obligations of the firm incurred while he is a partner;

and after his death his estate is also severally liable in a due court of administration for such debts and obligations so far as they remain unsatisfied but subject in England or Ireland to the prior payment of his separate debts.”

Partnerships may consist of a combination of individuals, partnerships or companies.

In relation to a partnership debt, recovery action may be taken against either:

  • the partnership (as an unregistered company)
  • any number of the solvent partners who are liable with the partnership for the debt (or part of it)
  • both the partnership (as an unregistered company) and any number of the solvent partners, in concurrent insolvency proceedings (that is at the same time).

We are not required to explain who we take action against and there is no appealagainst our choice.

Payment of the debt in full by one of the partners releases all the others. Questions ofwho contributes what may be settled afterwards between the partners themselves. In theunlikely event of an overpayment, as a result of one or more partners paying the debt, theoverpayment may be repaid pro-rata to those who made payment.

In concurrent insolvency proceedings, all action is suspended where one party (e.g. apartner) challenges the debt (e.g. applies for the statutory demand to be set aside). SeeS8-25 Civil Recovery.

Where a partnership continues to trade but a partner ceases to be a member of thepartnership, his liability for partnership AL debts continues until the date when wereceive notification of the change in the membership (s.36 (3) of the Finance Act 2001).If necessary, we will calculate any partner’s liability on a daily basis.

Section 36 (7) of the Finance Act 2001 provides:

“Where a person is a partner in a firm during part only of an accounting period

his personal liability for aggregates levy incurred by the firm in respect of aggregatesubjected to commercial exploitation in that period shall include

but shall not exceed such proportion of the firm’s liability as may be just andreasonable in the circumstances.”

Assessments and other documents served on the partnership since the partner left are alsoserved on the partner under Section 36 (4) and (5) of the Finance Act 2001).