C2Part 17Partnerships

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Calculation of partners' shares

C11263Profit-making period in which some partners have losses

1

For any accounting period of a firm, if—

a

the calculation under section 1259 in relation to a partner (“company A”) produces a profit, and

b

company A's share determined under section 1262 is a loss,

company A's share of the profit of the trade is neither a profit nor a loss.

2

For any accounting period of a firm, if—

a

the calculation under section 1259 in relation to company A produces a profit,

b

company A's share determined under section 1262 is a profit, and

c

the comparable amount for at least one other partner is a loss,

company A's share of the profit of the trade is the amount produced by the formula in subsection (3).

3

The formula is—

FP×PPPP+TCPmath

where—

FP is the amount of the firm's profit calculated under section 1259 in relation to company A,

PP is the amount determined under section 1262 to be company A's profit, and

TCP is the total of the comparable amounts attributed to other partners under Step 3 in subsection (4) that are profits.

4

The comparable amount for each partner other than company A is determined as follows.

Step 1

Take the firm's profit calculated under section 1259 in relation to company A.

Step 2

Determine in accordance with the firm's profit-sharing arrangements during the relevant accounting period the shares of that profit that are attributable to each of the other partners.

Step 3

Each such share is the comparable amount for the partner to whom it is attributed.

5

In subsections (2) to (4) “partner” means any partner in the firm, whether or not within the charge to corporation tax.