Introduction: basis periods for partnerships
Partners’ rental income - basis periods
For a partner, the basis period used to calculate the rental profits chargeable to tax for any tax year depends on:
- the type of partnership,
- the partner’s personal circumstances.
Partners in trading or professional partnership - basis periods
Many trading or professional partnerships have an ancillary source of rental income; for example, a farming partnership may own a farm that it lets to another farmer. For a partner in this type of partnership, the basis period used for rental profits is the same as that used for the trading or professional income.
Example - trading or professional partnership - normal case
For example, suppose the 2005-06 partnership trading profits are based on the year ended 31 December 2005; here the 2005-06 rental business profits should also be computed for the year ended 31 December 2005 and not the year ended 5 April 2006.
Trading or professional partnerships: first and last year & changes of accounting date
Special basis period rules apply for the years in which a partner joins or leaves a partnership and the accounts are not made up to 5 April, or where there is a change of partnership accounting date - see BIM72295.
Partners - investment business
The second type of partnership mentioned in PIM1030 is where the partnership runs an investment business:
- which does not amount to a trade, and
- which includes the letting of property or consists entirely of property letting.
For a partnership investment business you always calculate the rental profits for the tax year to 5 April (just like any other rental business).
For detailed guidance on the taxation of partnerships see BIM72200 onwards.