Income Tax (Trading and Other Income) Act 2005 section 855A

Notional business: indirect partners

Section 855A sets out special rules for determining when a partner's notional business starts and stops where the partner's firm is itself a partner (or indirect partner) in another trading partnership, and the firm's untaxed income or relievable losses flow from that underlying partnership from non-trading sources.

• This section applies where a firm is a direct or indirect partner in an underlying trading partnership, and the firm's untaxed income or relievable losses arise from non-trading sources within that underlying partnership rather than from the underlying partnership's own membership of yet another partnership.
• The partner's notional business is treated as starting on the later of two dates: the date the partner becomes an indirect partner in the underlying partnership, or the date the underlying partnership starts carrying on its trade.
• The partner's notional business is treated as permanently ceasing on the earlier of two dates: the date the partner stops being an indirect partner in the underlying partnership, or the date the underlying partnership permanently ceases its trade.
• Where the partner personally carried on the trade before the firm began it, the notional business starts when the firm starts the trade; where the partner carries on the trade after the firm permanently ceases it, the notional business ceases when the firm ceases the trade.