CheckLists.Tax (beta)
H5. Partnership/LLP income
INCOME TAX
Allocation and charging of profits
- Profits allocated under ITTOIA s.850 but charged under s.8
Basic approach
- ITTOIA s.850 calculates what an individual's share of the profits of a partnership is, but does not impose a tax charge on that profit share.
- The person chargeable on a profit share allocated to a partner is determined under s.8: the person who receives or is entitled to that profit share (Burley §65).
Determining profit share
- Look at how the economic value that goes to make up the profit was used (Burley §70).
- Cannot be divorced from commercial reality and substance (Burley §67).
Legislation: ITTOIA s.8; s.850;
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
- Individual still entitled to income represented by profit share following assignment if the income benefits him/her
- In Burley, the taxpayer assigned his right to the profit share of a partnership to an LLP, but the assignment was subject to a pre-existing arrangement that used the partnership profits to discharge a loan owed by the taxpayer. Held: taxpayer still entitled to profit (§§82 - 88).
- "[91] This is not a case where the income Mr Burley was receiving was being received by him in some fiduciary or representative capacity. Mr. Burley was entitled to the income for the purposes of section 8 because the income was being applied for his benefit, and his benefit only; it is his income on which he is fully chargeable to income tax."
Legislation:
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
LLP/partnership income arising to company
Mixed partnership reallocation to individual partner
- Profits can be reallocated even if they might be said to relate to a period when the individual was not a partner (Walewski, §31);
Legislation: ITTOIA s.850C to 850E.
Cases: Walewski v. HMRC [2021] UKUT 133 (TCC);
HMRC manuals:
Commentary:
See also:
Transfer of income streams through partnerships
XX
XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
NATIONAL INSURANCE CONTRIBUTIONS
Class 1
- Partners receiving directors fees
- Certain directors fees received by members of professional partnership are excluded from Class 1 (SSCR r.27; NIM12004).
Legislation: SSCR, r.8, r.27;
Cases:
HMRC manuals:
NIM12001 - Class 1: Calculating Class 1 NICs for Directors: Introduction;
NIM12004 - Class 1: Fees received by professional partnerships and other companies: Introduction;
Commentary:
See also: