Income Tax (Trading and Other Income) Act 2005 section 850A

Profit-making period in which some partners have losses

Section 850A deals with how a partner's share of partnership trading profit is adjusted when the firm overall is profitable but some partners individually show a loss under the profit-sharing arrangements.

• Where the firm's profit calculation produces a profit for a partner but the profit-sharing arrangements give that partner a loss, their share is treated as neither a profit nor a loss
• Where a partner has a profit share but at least one other partner has a loss, the profitable partner's taxable share is reduced using the formula FP × PP / (PP + TCP)
• The "comparable amount" for each other partner is found by applying the profit-sharing arrangements to the firm's profit as calculated for the partner in question
• "Partner" for these purposes means any partner in the firm, whether or not they are chargeable to income tax — so corporate partners are included in the calculation