Blm81090 - sale of lessor companies and similar arrangements: partnerships: amount of expense - change in partner company’s interest in the partnership - hmrc internal manual

BLM81090 - SALE OF LESSOR COMPANIES AND SIMILAR ARRANGEMENTS: PARTNERSHIPS: AMOUNT OF EXPENSE - CHANGE IN PARTNER COMPANY’S INTEREST IN THE PARTNERSHIP SECTION 424 CTA2010 As for lessor

companies the income amount is matched by an expense amount and this expense amount must be calculated and allocated appropriately. When a partner reduces its interest in a business another

partner will increase its interest in the business. This may happen because a partner leaves and the other partners take on the share of the leaving partner or when a partner sells its share

in a partnership to a new partner. When this happens, the other partner whose share increases as a consequence will be allocated an amount to be treated as an expense of its notional

business. This amount is limited to the ‘appropriate percentage of the amount of the income’. The appropriate percentage is calculated using the formula: OCI/PCD OCI is the increase in the

partner’s interest in the business. This includes an increase from ‘nil’ in the case of a company becoming a partner. PCD is the decrease in the partners’ interests in the business. The

amount of the income is the amount brought into charge under section 417. The total income and expense amounts match. Example: expense amount - change in interest in business Insert

‘attachment at BLM81090A’ here In this example the interest of A Ltd in the partnership business falls by 80%. The income amount is therefore 80% of the ‘basic amount’. The interest of B Ltd

in the partnership business increases by 80% and this increase is caused by the decrease in the interest of A Ltd in the partnership business. The expense amount is therefore 80/80 = 100%

of the amount brought into charge. The income and expense amounts match. Previous page Next page Print this page