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HMRC internal manual

Partnership Manual

HM Revenue & Customs
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Calculating the taxable profits: steps for computing partnership trading profits

The following steps should be taken when establishing the taxable profits in respect of a partnership trade:

  1. Ascertain the profit of the trade computed in accordance with generally accepted accounting principles (GAAP),
  2. adjust the accounting profit in accordance with any specific tax rules applicable, under income tax provisions for individuals and company tax provisions for companies, giving effect to any claims or elections made, then
  3. allocate a share of the adjusted profits to the partners in accordance with the profit sharing arrangements during the accounting period.