Revenue Note for Guidance
This Part sets out the tax treatment to be applied to income derived from partnerships and European Economic Interest Groupings (EEIGs). The broad effect of the Part is that, in the case of a trade or profession carried on by two or more persons in partnership, each partner’s share of the profits or losses are to be treated for tax purposes as if they were profits or losses of a separate business carried on solely by that partner. The notional separate business of a given partner is to be regarded as having been commenced when he/she became a partner and, if he/she ceases to be a partner, as permanently discontinued when he/she so ceases. This procedure also applies in the case of an European Economic Interest Grouping (EEIG) formed in accordance with Council Regulation (EEC) No. 2137/85 of 25 July, 1985 (OJ L 119 31.10.1985 p.1) that is, the profits or losses resulting from its activities are taxable only in the hands of its members.
(1) The definitions of “annual payment”, “balancing charge”, “basis period”, and “partnership trade” are self-explanatory.
The definition of “precedent partner” is framed to secure that, in relation to a case in which all the partners are non-resident, any reference to the precedent partner is to be construed as a reference to the resident agent, manager or factor of the firm.
The definition of “relevant period” is of fundamental importance and broadly means a continuous period, the whole or a part of which is subsequent to 5 April 1965, during which a trade is carried on by two or more persons in partnership and during which a complete change of proprietorship did not occur at any one time.
A relevant period in relation to a given partnership trade begins —
A relevant period in relation to a partnership trade ends on the happening of whichever of the following events first occurs —
If, before 6 April 1965 (but within the relevant period), a partial change of proprietorship occurred in consequence of which the trade was treated as having been set up or commenced at the time of the change under the rules then in force (that is, Rule 11(2) of the Rules applicable to Cases I and II of Schedule D, Income Tax Act, 1918), the relevant period is to be taken as having begun at the time of the change or at the time of the last such change, where there was more than one change.
(2) References in the Part to a given partnership are to include, where appropriate, references to any partnership by which the trade concerned is carried on during a relevant period and “partner” is to be construed correspondingly. For any relevant period “the partnership” is, in effect, regarded as an entity having a continuing existence despite any changes in its constitution.
(3) The provisions of the Part are to apply to professions as they apply to trades.
Relevant Date: Finance Act 2021