PM163090 | Commencement and cessation

S852 Income Tax (Trading and Other Income) Act 2005

A partner’s notional trade is treated as having commenced when they first joined the partnership or, if later, when the partnership started to carry on the actual trade. The notional trade is treated as having ceased when they leave the partnership or, if earlier, when the partnership ceases to carry on the actual trade.

If the partnership trade was previously carried on by one of the partners on their own, the notional trade for that partner is treated as having commenced at the time the actual trade was in fact set up and commenced.

Similarly, if one of the partners succeeds to the partnership business and thereafter carries it on, on their own, the notional trade for that partner is not treated as having ceased until the actual trade is permanently discontinued.

These rules also apply where a partner is an ‘indirect partner’ in a partnership. A partner starts to carry on the notional business at the later of when the partner becomes an indirect partner in the underlying partnership, or when the underlying partnership starts to carry on the underlying trade.

The partner permanently ceases to carry on the notional business at the earlier of when the partner ceases to be an indirect partner in the underlying partnership, or when the underlying partnership permanently ceases to carry on the underlying trade