293 Application to partnerships

Summary

Specific provisions apply in regard to balancing allowances and charges in respect of machinery or plant used in a trade carried on in partnership. Balancing allowances and charges are made on the existing partners at the time of the event giving rise to the charge or allowance. This applies even where there has been a change in the members carrying on the partnership since the acquisition of the machinery or plant. The amount of any balancing allowance or charge arising is computed in the same fashion as it would be computed in the case of a sole trader. Section 1010, however, contains rules for the apportionment of allowances and charges between the partners.

Where machinery or plant used for the purposes of the partnership trade belongs to one or more of the partners but not to the partnership itself, the same capital allowances and charges are made in respect of the machinery or plant as would have been made if the machinery or plant had at all relevant times belonged to all the partners and had been partnership property.

No balancing allowance or charge arises where a partner sells or gifts machinery or plant used for the purposes of the partnership trade to another partner and the machinery or plant continues to be used for purposes of the partnership trade.

Details

Balancing allowance or charge to be made on partners carrying on the trade in chargeable period related to the balancing event

(1)(a) In the case of a partnership trade which has not been permanently discontinued, any balancing allowance or charge arising in respect of machinery or plant is to be made on the partners carrying on the trade in the chargeable period related to the event which gives rise to the allowance or charge. In effect, changes in the composition of the partnership since the acquisition of the machinery or plant are ignored. The allowance or charge is to be computed in the same way it would be computed in the case of a sole trader. Section 1010, however, contains rules for the apportionment of allowances and charges between the partners.

Machinery or plant belonging to partners but not partnership property

(2) In the case of machinery or plant used for the purposes of a partnership trade which belongs to one or more of the partners but is not partnership property, the same initial allowances, wear and tear allowances, balancing allowances and balancing charges are to be made as would be due if the machinery or plant had at all material times been partnership property.

Machinery or plant transferred between partners

(3) Where machinery or plant used for the purposes of a partnership trade is sold or gifted by one partner to another partner, the sale or gift is not to be treated as giving rise to a balancing allowance or balancing charge if the machinery or plant continues to be used for the purposes of the partnership trade. The does not preclude a balancing allowance or balancing charge being made on the occasion of a change in the partnership which is treated as a discontinuance of the partnership trade.

Payments received from partnership for use of machinery or plant owned by partner

(4) The rules in subsections (2) and (3) do not apply in any case in which the partner who owns the machinery or plant obtains a rent or other payment from the partnership in respect of the use of the machinery or plant which is allowable as a deduction in computing the profits of the partnership trade.

Relevant Date: Finance Act 2021