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HMRC internal manual

Partnership Manual

Partners' returns: returning the partnership profit share

As per the guidance at PM138000, each partner must declare the share of profit allocated to them in the partnership return on their own tax return.

For individuals, this should be shown on the partnership page (SA104) of the return, not on the self employment page (SA103).

Company tax returns do not include a separate partnership page to declare profits received by a company in its capacity as a partner in a partnership. Instead, the profits of the partnership should be included on the return together with any other profits that the company earns in its own capacity or receives from other partnerships or joint ventures of which it is a member. It is important to remember, however, that each trade carried on in partnership, either directly or indirectly is separate from any trade carried on by the company in its own capacity. The tax computation should set this out clearly. This is necessary to ensure that the profits and losses of each trade are computed correctly and that trading losses carried forward are only used against future profits of the same trade.

Bear in mind the guidance at PM162000 onwards relating to individual partners’ basis periods as there may be circumstances in which the profit allocation to a partner from the partnership will not match the profits that need to be returned for a tax year by the partner. The main example of when this will happen is where the commencement provisions apply to the partner’s notional trade. Indeed, there may be no allocation for a new partner’s first tax year as the partnership does not have an accounting date between the date of the partner joining and the end of the tax year. In this situation, the new partner should estimate his or her profit share for the period from commencement to 5 April and return this amount as provisional. An amended return should be submitted as soon as the actual figures are known.

The share of partnership profits shown on the partnership return is conclusive for tax purposes as to whether a person does or does not have a share in the partnership profit or losses for any period and what their share is. The share of profits that a partner enters in their own return must correspond with the profit allocated to them in the partnership return. For returns relating to the tax year 2018-19 onwards where there is a disagreement between the partners over the allocation of profits, partners can dispute the figure of profit allocated to them by referring the dispute to the tribunal service.  However the partnership share shown on the partnership return will remain conclusive for tax purposes unless and until the tribunal determine a different amount. Further guidance can be found at PM138000 and PM150000.

The reasons for any discrepancies between a partner’s profit share shown on the partnership statement and that declared on his or her tax return should be explored if the partner has not referred a dispute to the tribunal service. For the reasons mentioned above, discrepancies may be more difficult to identify in respect of company partners and special attention should be given to partnerships which include company partners.