Calculation of partnership gains and losses

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Calculation of partnership gains and losses
  • Introduction
  • Allocation of gains
  • Statutory rules and HMRC practice
  • The basic rule
  • Disposal of a partnership asset
  • Disposal of a fractional share of an asset between the partners
  • Interaction with capital gains tax reliefs


This guidance note outlines the capital gains tax rules for partners. More complex issues are covered in the Capital gains of a partnership guidance note (subscription sensitive). For a discussion of the income tax on partnership profits, rather than gains, see the Partnership profit allocation guidance note.

This guidance note assumes a general knowledge of capital gains tax (CGT). For detailed guidance on CGT for individuals see the Introduction to capital gains tax guidance note and the other notes in this sub-topic.

The taxation of gains where the partnership includes a corporate partner is not covered in the Personal Tax module; neither is the capital gains tax position of partnerships with a foreign partner, or of partnerships controlled abroad. For these, see Simon's Taxes C3.230, C3.223, B7.203 and B7.302 (subscription sensitive).

Allocation of gains

The first step is to establish whether the chargeable asset is a partnership asset.

Partners are free to agree amongst themselves how gains on partnership assets are to be allocated. There is no requirement that capital gains should be allocated in the same proportion as profits, or that the allocation should reflect the contributions made by the partners.

The ratio in which gains are allocated should be set out in the partnership agreement or in other documentation, such as minutes of partnership meetings. Failing that, the partnership accounts can be used to demonstrate the ratios. If there is no written agreement or other evidence, the default position is that the assets should be treated as held by the partners in equal proportions.

Partnership Act 1890, s 24(1) (subscription sensitive)
Statutory rules and HMRC practice
The legislation

All partnerships are transparent for income tax purposes. This is the case even for LLPs or Scottish partnerships where the partnership itself is a

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