I6.211 Formation of partnerships and IHT
The idea of a partnership is that each partner shall contribute one or more of capital, expertise, connections, time and energy, and that each shall be entitled to share in the partnership's assets, its capital profits (or losses) and its revenue profits (or losses). However, the extent to which each shall contribute, and to which each shall share, is a matter for the intending partners alone.
A partner who makes no tangible contribution makes no disposition, and for him the formation of the partnership has no immediate IHT consequences. A partner who does contribute capital, whether in cash or kind, does make a disposition. This disposition will reduce his estate, if only to the extent that, once contributed, capital cannot be recouped without first securing the consent of all the other partners or forcing dissolution. Provided, however, that his contribution is fully reflected in the partners' capital sharing ratios, there may be no transfer of value1. Each partner will have suffered a diminution in his estate in consideration of the others suffering a similar, proportionate diminution, a transaction on arm's length terms, without gratuitous intent.
If partners are regarded by HMRC as connected persons at the moment of formation of their partnership (see I6.203), to come