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HMRC internal manual

Partnership Manual

From
HM Revenue & Customs
Updated
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Trading profits: notional trade and basis periods - sole trader and partnership changes

It is important to be aware of the effect of sole trader and partnership changes on the commencement and/or cessation provisions.

A partnership business is deemed to cease and recommence whenever there is a complete change in ownership of a continuing business but it is deemed to continue if there is only a partial change of ownership.

However, it should be noted that the commencement and cessation rules are applied to the ‘notional trade or profession’ carried on by any partner who joins or leaves the partnership on a change of ownership, even where this is only a partial change of ownership. For example, a new partner joining an existing partnership will operate the commencement rules to his or her notional trade whilst the pre-existing partners will simply continue to return the profits of their notional trade as if there had been no change in ownership.

It may be that a partnership trade was previously carried on by one of the partners as a sole trader. In that case, the original partner’s notional trade is treated as having commenced when he or she commenced their sole trade.. Similarly, a partner may carry on a business on their own after all other partners have left. The partner’s notional trade continues until the actual business is permanently discontinued.