Commentary

B7.502 Allocation of partnership income—straight apportionment

Business tax
Business tax | Commentary

B7.502 Allocation of partnership income—straight apportionment

Business tax | Commentary

B7.502 Allocation of partnership income—straight apportionment

The partnership profits and losses for an accounts period are allocated to the partners according to the profit sharing arrangements for the relevant accounting period1.

The calculation of the profit or loss to be allocated depends on the status of the partner. Where the partner is an individual or trustee resident in the UK, the calculation is of the profit computed on income tax rules; where the partner is a company, the calculation is of the profit computed on corporation tax rules, and where the partner is non-resident, the calculation is of the profit arising in the UK (see B7.401).

Note that the allocation of profit or loss between partners must result in a straight apportionment of the actual profit or loss made by the partnership. If there is a mixed apportionment such that some partners are profitable and other are loss making, the special computational rules for mixed notional profits and losses apply; see B7.503.

The profit or loss allocated to a partner is treated as a profit or loss of a separate trade carried on by him alone (a 'notional trade')2. If the partnership is carrying on a trade of farming, the notional farming trade carried on by a partner is treated as a separate trade from any other farming trade he may carry on3.

Prior shares

Where some or all of the partners are entitled to fixed prior shares, commissions or interest on capital, those entitlements are allocated first, and the balance is allocated

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