Corporation Tax Act 2009 section 1259

Calculation of firm's profits and losses

Section 1259 sets out how to calculate the trading profits and losses of a partnership (referred to as a "firm") when one or more of the partners is a company within the charge to corporation tax.

• When a partnership trades and a partner is a company subject to corporation tax, the firm's trading profits must be calculated separately for each corporate partner based on that partner's residency status.
• For a UK-resident corporate partner, the firm's profits are calculated as if the entire trade were carried on by a UK-resident company, capturing worldwide trading profits.
• For a non-UK-resident corporate partner, the firm's profits are calculated as if the trade were carried on by a non-UK-resident company, restricting the figure to profits attributable to a UK permanent establishment.
• Trading losses of the firm are calculated on exactly the same basis as profits, using the same residency-based approach, and the section is subject to the supplementary provisions in section 1260.