Commentary on Sections Overview Section 853: Basis periods for partners’ notional trades
3181.This section sets out the rules for determining the basis periods for the assessment of each partner’s share of the firm’s profits or loss. It is based on section 111 of ICTA.
3182.Subsection (1) sets out the general rule that the basis periods for the partner’s notional trade are determined by reference to the accounting dates of the firm’s actual trade. The subsection repeats the assumption in section 111(2) of ICTA that the notional trade is carried on by an individual.
3183.Section 111(4)(c) of ICTA ensures that, in most cases, the basis period for the partner’s deemed trade or profession is determined by reference to the same periods of account as are used by the firm. Section 111(4)(d) of ICTA also ensures that, even if the firm has a change of accounting date, the general rule usually still applies.
3184.This result is stated explicitly in subsection (1)(b) of the section.
3185.Subsection (2) deals with an exception to the general rule.
3186.Section 111(5) of ICTA applies if the firm has an “ineffective” change of accounting date. In that case, the basis period rules are applied as if the accounts were drawn up to the old accounting date. The description of the change as ineffective does not appear in the source legislation or elsewhere in the text of this Act. But it appears in the heading to section 219 of this Act and is used here in conjunction with a cross-reference to section 216.
3187.Subsection (3) sets out how a firm can give the notice required by section 217 of this Act. It goes on to set out how the firm can appeal against a notice by the Inland Revenue under section 218.
3188.Subsection (4) is a special rule to deal with the case of enterprise allowance received by an individual partner. It explains how section 207 of this Act operates so that the allowance is taxed only once.