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