Commentary

B7.102 Establishing whether a partnership exists

Business tax
Business tax | Commentary

B7.102 Establishing whether a partnership exists

Business tax | Commentary

B7.102 Establishing whether a partnership exists

There is no one single factor that determines whether a partnership exists, as it is a combination of several different factors. However, the following points will usually have to be considered when establishing if a partnership exists:

  1.  

    •     Is the partnership trading with a view to profit?

  2.  

    •     Is the partnership a partnership or simply the joint ownership of property?

  3.  

    •     Do the profit sharing terms indicate a partnership arrangement?

  4.  

    •     Is there any documentary evidence supporting the existence of a partnership?

Trading in common with a view of profit

To fall within the definition of a partnership, the partners must be carrying on a business in common and doing so with a view of profit.

In other words do the activities of the partners actually constitute a trade or business?

HMRC specifically confirm that property and investment management, carried on as a commercial venture, is within the definition of 'business' for this purposes1. Such partnerships are sometimes known as 'investment partnerships' and are usually in the form of limited partnerships or LLPs (see B7.106, B7.107 respectively).

In Ilott2, four people had agreed a business idea in principle, acquired a domain name and prepared initial proposals etc. On a subsequent breakdown of the relationship between the individuals it was held that there was no partnership in place. The preparatory activities were not enough to amount to carrying on a business with a view of profit.

In Brain Disorders Research Limited Partnership3 the Court of Appeal found

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