Entrepreneurs’ relief for partnerships

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Entrepreneurs’ relief for partnerships
  • Overview
  • Disposal of a share of the partnership
  • Disposal by the partnership
  • Advance planning

This guidance note discusses the application of entrepreneurs' relief for partners only. See also the Entrepreneurs’ relief guidance note. For further guidance, see Simon’s Taxes C3.1302C–C3.1303A (subscription sensitive).

The only provisions for chargeable gains directly applicable to partnerships are found at TCGA 1992, s 59 and TCGA 1992, s 59A. The latter is for a Limited Liability Partnership (LLP). In both cases the effect is to make the partnership transparent for the purposes of chargeable gains.

Other than in the cases described in TCGA 1992, s 59A(4) in relation to an LLP going into liquidation or being wound up, all partnerships are transparent for chargeable gains purposes.

This note considers the chargeable gains position for individual partners' eligibility for entrepreneurs' relief.

Overview

Each individual who is a partner in a business at any time is treated as owning the business carried on by the partnership at that time. Therefore, an individual's transactions in connection with becoming or being a member of a partnership can qualify for entrepreneurs' relief as they would if the individual carried on the business on his own account.

TCGA 1992, s 169I(8)

To be eligible for entrepreneurs' relief, a disposal must be:

  • a material disposal of business assets
  • a disposal that is associated with a material disposal, or
  • a disposal of trust business assets

TCGA 1992, s 169H

Only the first two options can apply for partnerships. The third option requires that the business is owned by a trust. See the Entrepreneurs’ relief ― trusts guidance note (subscription sensitive).

TCGA 1992, s 169K

There will therefore be four different situations where

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