Corporation Tax Act 2009 section 385

Company partners' shares where firm owns deeply discounted securities

Section 385 explains how deeply discounted securities held by a partnership are allocated to each company partner for corporation tax purposes.

• When a partnership holds a deeply discounted security, each company partner is treated as owning a share of that security rather than the partnership owning it outright.
• Each partner's share is determined by the firm's profit-sharing arrangements — the same ratio used to divide profits or losses between partners.
• The allocation is calculated as though all partners in the firm were companies, ensuring a consistent basis for apportionment.
• A deeply discounted security is one where the discount at issue is sufficiently large to fall within the definition in Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005.