Income Tax (Trading and Other Income) Act 2005 section 853

Basis periods for partners' notional trades

Section 853 sets out how to determine the basis periods used to assess each individual partner's share of a firm's profits or losses, by treating the partner's notional trade as though it were a sole trade.

• Each partner's basis period is worked out by applying the normal sole-trader basis period rules, using the same accounting dates as the partnership's actual trade.
• Where the partnership changes its accounting date but the change is ineffective (because conditions for a valid change are not met), the accounts are treated as still drawn up to the old accounting date.
• Any formal notice required to validate a change of accounting date, or any appeal against HMRC's refusal to accept the change, must be given or made by a single partner nominated by the firm for that purpose.
• Where a partner receives a business start-up payment (such as an enterprise allowance) that falls into an overlap period, special rules ensure the partner's share of profits attributable to that payment is only taxed once.