Annex 1: Minor Changes in the Law Change 84: Partnerships: reinstatement of section 111(10) of ICTA: section 1258
This change makes clear that the rule in section 1258 of this Act (that a firm is not a separate entity for tax purposes) applies to a firm carrying on any business, whether or not that business is a trade.
It brings the income tax and corporation tax codes back into line.
Section 111(1) of ICTA provides that a partnership is not to be treated as an entity separate and distinct from the partners. The subsection refers to a trade or profession carried on in partnership.
Before section 111 was amended by ITTOIA subsection (1) applied to all businesses, not just trades and professions. The extension to all businesses was lost when subsection (10) was repealed by ITTOIA.
But sections 114 and 115 of ICTA set out the rules for calculating the profits of a firm. Those sections apply to all businesses, not just trades and professions. So it is doubtful whether the absence of the rule in section 111(10) has any consequences.
The broadening of the rule brings more companies into it. Whether this is favourable or adverse to those companies depends on the particular circumstances.
This change is in principle adverse to some taxpayers and favourable to others. But it is expected to have no practical effect as it is in line with generally accepted practice.