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

Notional trades: indirect partners

Section 852A sets out the rules for determining when a partner's notional trade begins and ends where the partner's firm is itself a partner (or indirect partner) in another trading partnership.

• The section applies where a partnership is a direct or indirect partner in another trading partnership (the "underlying partnership"), and the firm's trading profits or losses derive from that underlying trade.
• The partner's notional trade starts on the later of when they become an indirect partner in the underlying partnership or when the underlying partnership begins the underlying trade — unless the partner was already carrying on the trade personally, in which case the notional trade starts when their actual trade began.
• The partner's notional trade permanently ceases on the earlier of when they stop being an indirect partner in the underlying partnership or when the underlying partnership permanently stops the underlying trade — unless the partner continues carrying on the trade personally, in which case the notional trade ends when their actual trade ends.
• The underlying partnership's profits or losses must not themselves arise from membership of a further partnership — this section only applies to one layer of indirect partnership.