Partnerships and capital gains

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Partnerships and capital gains
  • Statement of practice D12
  • Partnership asset sharing ratios
  • Disposals of partnership assets to third parties
  • Partnership assets distributed to partners
  • Example
  • Changes in sharing ratios
  • Assets contributed to a partnership
  • Revaluation in the accounts
  • Example
  • More...

Partnerships and capital gains

This Practice Note is about the capital gains tax and corporation tax on chargeable gains treatment of UK general partnerships, limited liability partnerships (LLPs) and limited partnerships.

In this note the term 'partner' should be read as including a member of an LLP, and 'CGT' is used as a shorthand for both capital gains tax and corporation tax on chargeable gains.

Partnerships are tax transparent, meaning that they are not taxable in their own right. Instead, partnership profits and gains are directly taxable on the partners. For CGT purposes, capital assets of the partnership are treated as owned by the partners in fractional shares. The partners' interests in the partnership itself are not treated as separate capital assets.

In the case of an LLP, there are some circumstances in which tax transparency may not apply or may be lost. An LLP that is not tax transparent will be taxed in the same way as a company, and the CGT treatment described in this note will not apply. For more details, see Practice Note: Taxation of UK LLPs—When is an LLP not tax transparent?.

For general information on the taxation of capital gains, see: Capital gains and businesses—overview

Statement of practice D12

There is very little legislation on the application of CGT to partnerships. The main authority is an HMRC statement of practice known as SP D12.

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