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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Particular issues: partnership basis periods - transitional rules

Paragraph 23 Schedule 12 Finance Act 2000 A partnership (or, if the intermediary is an individual, that individual) can choose to have its taxable profits calculated as if it had ceased and recommenced trading on 6 April 2000. It may be beneficial for it to do this in order to avoid a substantially increased liability for the first tax year in which the new rules apply. The tax and secondary NICs on the deemed payment would have been due on 5 April 2001, but relief against the profits of the partnership might not be given until the following tax year, depending on the partnership’s accounting date.

The election for the deemed cessation must be made in the 2000/2001 Partnership Return (or if the intermediary is an individual in the individual’s 2000/2001 Return). This has to be submitted within the normal time limit.

Notwithstanding any deemed cessation, a partner’s share of the losses from the pre 6 April 2000 business may be carried forward against his/her share of the subsequent profits of the post 6 April 2000 business. The same position applies where the intermediary is an individual.