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HMRC internal manual

Partnership Manual

HM Revenue & Customs
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Introduction to Partnerships and Partnership Taxation: taxing the profits of a business carried on in partnership

For tax purposes, a partnership is not regarded as a separate and distinct entity and we ‘look through’ to the persons making up the partnership. Partnerships are described as ‘transparent’ for this reason. This treatment applies equally to all types of partnership, including both those without separate legal personality, e.g. English general partnerships, and those with separate legal personality, e.g. Scottish partnerships and Limited Liability Partnerships. Statutory provisions exist to ensure that partnerships with separate legal identity are taxed in the same way as general partnerships.

Under this principle, partnerships have no tax liability. It should be noted, however, that profits of the partnership are computed at partnership level before being apportioned to the members. Further guidance on how this works in practice is available at BIM82205 and BIM82210. Partners are liable to tax on their share of profits from the partnership.

This treatment is in contrast to how ‘opaque’ entities, such as companies, are taxed; an opaque entity is itself liable to tax on its income and gains.

However, the partnership (that is all the partners jointly) is responsible for meeting some tax debts, such as PAYE and VAT. Issues relating to such other tax obligations are covered in the manual at PM60000 onwards.