This guidance note explains the general rules for the calculation of partnership trading profits before allocation to the partners. The commentary is mainly concerned with partnerships of individuals but more details on the treatment of corporate partners can be found below.
Even though all partnerships are transparent for tax purposes and profits are ultimately taxed on the individual partners (see the Partnerships ― overview guidance note), the first step when calculating the taxable profits is to compute the profit or losses of the partnership for a period of account as if the partnership is a single UK resident individual.
Having calculated the partnership profits, partners are free to agree amongst themselves how the profits of the partnership are allocated between them. There is no requirement that the profit share reflects the contribution made by the partners, more detail is set out in the Allocation of partnership profit or loss guidance note.
Once allocated to the partners the profit is then taxed on the individual partners, see the Taxation of partnership trading profits guidance note. When
Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Popular Articles
Class 4 national insurance contributions
Class 4 national insurance contributionsWhat is Class 4 NIC?Class 2 and Class 4 national insurance contributions (NIC) are paid by self-employed individuals and partners in a partnership on their profits arising within the UK. This guidance note considers Class 4 contributions. For Class 2
Supplies of goods and services connected with education
Supplies of goods and services connected with educationThis guidance note provides an overview of the VAT treatment of goods and services provided in connection with supplies of education. This should be read in conjunction with the following guidance notes:•Supplies of education•Local authority
Non-business expenses
Non-business expensesIntroductionIn order for an expense to be tax deductible it must be incurred because of an employee’s employment. Any non-business related expense is, therefore, not relievable except in some very particular circumstances.This guidance note deals with three separate issues. The
