Taxes Consolidation Act 1997 section 1008

Separate assessment of partners

Section 1008 sets out the rules for the separate assessment of each partner in a partnership trade, treating each partner's share of the partnership profits or losses as if it arose from a notional trade carried on solely by that partner.

• Each partner is taxed on his or her share of the partnership profits as if those profits arose from a separate trade (a "several trade") carried on by that partner alone, with commencement and cessation rules applied individually to each partner.
• A partner's share of profits or losses is determined by apportioning the full tax-adjusted profits or losses of the partnership in accordance with the profit-sharing ratio in the partnership agreement, with any unallocated balance apportioned among the partners in their agreed ratio, the ratio used for the latest accounts, or in equal shares.
• The inspector determines the overall partnership profits as if the trade had been set up at the start of the relevant period, permanently discontinued at the end of that period, and carried on throughout by a single notional person.
• The section does not convert income that would otherwise not be earned income (such as a sleeping partner's income) into earned income merely because it is treated as arising from the partner's several trade.