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HMRC internal manual

Partnership Manual

HM Revenue & Customs
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Calculating the taxable profits: Partnership annuities: the partnership

The payments can be viewed as being made from the current partners to the retired partner. The annuities may be charged to the partnership’s profit and loss account. However, if this is the case, they should be added back in the tax computation. Instead, relief is given in the tax computation by allowing the annuities payable to be allocated to the partners as charges on income; the allocation is made in accordance with the normal partnership sharing arrangements. Under ITA2007/S900, annuities paid to retired partners must be made net of basic rate tax. There is guidance on this requirement at SAIM9060.