1010 Capital allowances and balancing charges in partnership cases

Summary

This section deals with capital allowances and balancing charges to be made in charging the profits of the several trade of a partner. Broadly, it provides that, as respects a given asset, there is first to be determined the amount of the allowance or charge which, if this part of the Act had not been enacted, would have fallen to be made to or on the partnership for the year of assessment concerned and that the allowance or charge so computed is then to be apportioned between the partners.

Details

(1) Subject to the provisions of the section, the general law as regards capital allowances and balancing charges to be made in charging the profits or gains of a trade (as distinct from allowances to be given by discharge or repayment of tax, or charges to be made by way of assessment under Case IV) is to have effect in relation to the several trade of a partner.

(2) In the case of allowances, a partner is entitled for a year of assessment to his/her “appropriate share” of the allowance (the “joint allowance”) in respect of any asset which would have been made for that year in respect of that asset in charging the profits of the partnership trade if that trade had been —

• commenced at the beginning of the relevant period,
• carried on, at all times, by the persons by whom it was carried on in the year of assessment concerned, and
• where the relevant period has ended, permanently discontinued at the end of the relevant period.

This treatment is based on the suppositions that the persons carrying on the trade in the year of assessment are assessable jointly and that all things done in, or in relation to, the carrying on of the trade to or by the persons by whom it was from time to time carried on had been done to or by the persons carrying it on in the year of assessment.

(3) Similar procedures apply to balancing charges as apply to allowances.

(4) Where, at the end of a relevant period in relation to a partnership trade, a person (or another partnership) succeeds to the trade and an asset which was in use for the purposes of the trade up to the date of the succession passes, without being sold, to the successor and continues to be used by him/her for the purposes of the trade, the asset is to be treated as having been sold for its market value and balancing allowances or balancing charges are to be made accordingly.

(5) Where, in the case of a relevant period lying partly before 6 April 1965, the trade was not treated for tax purposes as having been commenced at the beginning of the period, the period is to be extended backwards to the next earlier date on which the trade was treated as having been commenced.

(6) The total amount of joint allowances and the total amount of joint charges for any year of assessment are, subject to the appeal provisions in section 1012, to be determined by the inspector. The inspector may amend his/her determination where appropriate.

(7) The total amount of joint allowances and the total amount of joint charges are to be apportioned in the same way as a like amount of profits arising in the “trading period” would be apportioned under the terms of the partnership (profits, for this purpose, being taken to be profits remaining after all partners’ salaries, interest on capital, etc had been provided for). The trading period is normally the year of assessment for which the joint allowance or joint charge is computed but, where the relevant period ends in the year of assessment, the part of that year up to the end of the relevant period is the trading period. The Revenue Commissioners may adopt a different basis of apportionment where, on representations having been made to them through the inspector, they are satisfied that hardship would otherwise be caused. All the partners concerned (including the personal representatives of a deceased partner) must join in the representations.

(8) Where, for a year of assessment, the assessment on a partner is insufficient to absorb his/her share of the joint allowances, unrelieved allowances are to be carried forward to the following year and, for the purposes of assessment, apportioned in the same way as a joint allowance for that following year. Similar treatment applies to any allowances to the partnership, for 1964–65 or earlier years, which have not been effectively relieved and which, if the previous law continued to operate, would have been available for set off against the assessment on the partnership for 1965–66 or later years.

(9) A claim by the precedent partner for a joint allowance is necessary and sufficient to enable his/her appropriate share of that allowance to be made to each of the partners. The claim must be included in the return delivered by the precedent partner under section 880.

Relevant Date: Finance Act 2021