Income Tax (Trading and Other Income) Act 2005 section 852

Carrying on by partner of notional trade

Section 852 establishes how each partner in a firm is treated as carrying on their own individual "notional trade" for tax purposes, and sets out the rules for when that notional trade starts and permanently ceases.

• Each partner's share of the firm's trading profits or losses is treated as profits or losses of a separate trade carried on by that partner alone — known as the "notional trade"
• A partner's notional trade starts at the later of joining the firm or the firm commencing the trade, unless the partner was already carrying on the trade as a sole trader beforehand, in which case it starts when the actual trade began
• A partner's notional trade permanently ceases at the earlier of leaving the firm or the firm ceasing to trade, unless the partner continues the trade alone afterwards, in which case it ceases only when they finally stop trading
• A change of residence triggers the deemed cessation of one notional trade and the immediate start of another, but trading losses from before the change can still be carried forward against future profits