The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
For income and capital gains tax (CGT) purposes, partnerships are regarded as being tax-transparent, ie they are not taxed in their own right but instead one looks to the partners and applies taxation principles to them. Accordingly, if the partners of a property partnership are individuals, then much the same considerations apply as for an individual personally purchasing an investment property; if the partners are corporate entities, then they will be taxed as such.
See the Types of partnership and types of partner guidance note (subscription sensitive).
Profits of a partnership are taxed as they arise and, as with the sole trader, it should be possible to obtain tax relief for interest paid on loans or other finance taken out to buy or improve the premises, but see below for changes to interest relief from 2017/18. Similarly, it should be possible for the partnership to claim tax relief for interest where capital is effectively being withdrawn from the business. See the Trading profits of a partnership and Allocation of partnership income guidance notes (both subscription sensitive).
Starting in the 2017/18 tax year, relief for finance costs relating to residential property (in the UK or overseas) is to be restricted to the basic rate of income tax. The restriction is to be phased in progressively over a four-year period with the full impact coming in 2020/21. These measures apply to landlords of residential property who are subject to income tax on their property income, although non-resident companies only fall within the provisions if they act in a fiduciary or representative capacity. Therefore, trustees, personal representatives and individuals will be affected.
These rules are limited to residential property; there is no change to the loan interest relief available against profit from commercial property.
The CGT position of personal ownership choices (ie through a partnership
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