CheckLists.Tax (beta)
H5. Partnership/LLP income
INCOME TAX
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Allocation and charging of profits
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- Profits allocated under ITTOIA s.850 but charged under s.8
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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).
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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).
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Legislation: ITTOIA s.8; s.850;
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
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- Individual still entitled to income represented by profit share following assignment if the income benefits him/her
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- 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."
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Legislation:
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
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Transfer of income streams through partnerships
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XX
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XX
Legislation:
Cases:
HMRC manuals:
Commentary:
See also:
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