Finance Act, 1965

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Separate assessment of partners.

51.—(1) In the case of a partnership trade the Income Tax Acts shall, subject to the provisions of this Part of this Act, have effect in relation to any partner in the partnership as if for any relevant period—

(a) any profits or gains arising to him from the trade and any loss sustained by him therein were respectively profits or gains of, and loss sustained in, a trade (hereafter in this Part referred to as a several trade) carried on solely by him being a trade—

(i) set up or commenced at the beginning of the relevant period, or if he commenced to be engaged in carrying on the partnership trade at some time in the relevant period other than the beginning thereof, at the time when he so commenced, and

(ii) when he ceases to be engaged in carrying on the partnership trade, either during the relevant period or at the end thereof, permanently discontinued at the time when he so ceases, and

(b) he had paid the part he was liable to bear of any annual payment paid by the partnership.

(2) (a) For any year or period within the relevant period the amount of the profits or gains arising to any partner from his several trade, or the amount of loss sustained by him therein, shall, for the purposes of subsection (1) of this section, be taken to be so much of the full amount of the profits or gains of the partnership trade or, as the case may be, of the full amount of the loss sustained in the partnership trade as would fall to his share on an apportionment thereof made in accordance with the terms of the partnership agreement as to the sharing of profits and losses.

(b) Where the year or period (hereafter in this paragraph referred to as the period of computation) for which the profits or gains of, or the loss sustained in, the several trade of a partner is to be computed under this subsection, is, or is part of, a year or period for which an account of the partnership trade has been made up, sections 15 and 16 of the Finance Act, 1929 , shall apply in relation to the partner as if an account of his several trade had been made up for the period of computation.

(c) Where in the case of the several trade of a partner the basis period for any year of assessment begins before the 6th day of April, 1965, the profits or gains of that basis period shall be computed in accordance with the foregoing provisions of this subsection notwithstanding that those provisions were not in force in that period or some part thereof.

(3) For the purposes of subsection (2) of this section, the full amount of the profits or gains of the partnership trade for any year or period, or the full amount of the loss sustained in such trade in any year or period, shall, subject to section 53 of this Act, be determined by the inspector of taxes and any such determination shall be made as it would have fallen to be made if the trade—

(a) had been set up or commenced at the beginning of the relevant period, and

(b) where the relevant period has come to an end, had been permanently discontinued at the end of that period, and

(c) had at all times within the relevant period been carried on by one and the same person and everything done in the carrying on thereof to or by the persons by whom it was in fact carried on had been done to or by that person:

Provided that in a case in which the relevant period began at some time before the 6th day of April, 1965, and the trade did not fall to be treated for the purposes of income tax as having been set up or commenced at that time, the relevant period shall, for the purposes of this subsection, be deemed to have begun at the time at which the trade was treated for the purposes of income tax as having been set up or commenced and, in any such case, any profits or gains arising to any person from the trade, or any loss sustained by him in the trade, for any year or period within the relevant period during which he was engaged in the trade on his own account shall be deemed to be profits or gains arising to him from, or, as the case may be, loss sustained by him in, a partnership trade in which he was entitled during the year or period in question to the full amount of the profits or gains arising or was liable to bear the full amount of the loss.

(4) Where the several trade of a partner is, under subsection (1) of this section, deemed to have been set up or commenced before the 6th day of April, 1965, section 5 of the Finance Act, 1942 , shall apply as if this section had always had effect save that for the year 1964-65, where the claim under the said section 5 is for the year 1965-66, the amount of the assessment in respect of the profits or gains of the several trade shall, for the purposes of the said section 5, be taken to be the partner's share, computed in accordance with the Income Tax Acts, of the amount of the profits or gains of the partnership trade on which the partnership was assessed for the year 1964-65, no regard being had to any deduction made therefrom in respect of a loss or to any capital allowance or balancing charge made to or on the partnership.

(5) Where in relation to a partnership trade, the relevant period, having begun before the 6th day of April, 1964, ends within the year 1965-66, any additional assessment in respect of the profits or gains of the trade which, if this Part had not been enacted and the trade had fallen to be treated as permanently discontinued within the year 1965-66, might have been made, under paragraph (b) of subsection (1) of section 12 of the Finance Act, 1929 , for the year 1964-65 may be made notwithstanding the enactment of this Part.

(6) Where the shares to which the partners are entitled in the basis period for a year of assessment do not exhaust the profits of the trade carried on by the partnership for that period, an assessment shall be made under Case VI of Schedule D on the precedent partner in respect of the unexhausted portion of the profits and the precedent partner shall, if and when such balance falls to be paid to a person entitled thereto, be entitled to deduct from such balance any amounts of tax which have been assessed on and paid by him and he shall be acquitted and discharged of any such amounts.

(7) This section shall not cause any income which, apart from this section, is not earned income to become earned income.