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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Partnerships: Introduction

ICTA 88/S111 (old)

ITTOIA05/PART9

ITSA Years (but see below for transitional years)

Partnerships are responsible for returning information relating to the partnership business. This information includes the profits for any period of account, the capital allowances claimed for that period and details of the profit allocation in force for that period.

But for the purposes of assessment and payment of tax, partnerships are not treated as a legal entity separate and distinct from the individual persons making up the partnership and the Income Tax rules operate on the partners as if the partnership did not exist.

There are no partnership assessments under SA. Instead each partner is allocated a share of the partnership profits (or losses). Those profits (or losses) are treated as if they had arisen to the partner as an individual in business. The partnership is not responsible for paying the tax on the partnership profits. Each partner is solely responsible for the tax due on his or her share.

Individual partners are therefore required to include their share of any partnership profits in their own returns of total income and in their own self-assessments.

Pre ITSA Years

A partnership does not, in English law, constitute a `person’ distinct from its individual members. Whilst in Scottish law the position is different, in practice ICTA88/S111 (old) applied as though English law ran throughout the United Kingdom.

Tax in respect of the profits of a trade or profession carried on by two or more persons jointly was computed and stated jointly and in one sum and a joint assessment was made in the partnership name.

Transitional Years

An ‘old’ partnership, that is one set up before 6 April 1994 and continuing to trade after 5 April 1997 (without a deemed cessation between these dates) was subject to assessment for 1996/7 in the partnership name EM7130.

A ‘new’ partnership, that is one set up on or after 6 April 1994, followed the SA pattern for the years 1994/95 and 1995/6 in that assessments were made on the partners, not the partnership.