Commentary on Sections Changes in partnership Section 1262: Allocation of firm’s profits or losses between partners
3210.This section is the link between the firm’s profit or loss and the amounts assessable on the partners. It is based on section 114 of ICTA. The corresponding rule for income tax is in section 850 of ITTOIA.
3211.The basic rule in this section applies in most cases. But, if the basic rule produces a loss for a partner when the firm’s result is a profit, the allocation is adjusted under section 1263. Similarly, if the basic rule produces a profit for a partner when the firm’s result is a loss, the allocation is adjusted under section 1264.
3212.In a firm where some partners are liable to income tax and others liable to corporation tax, the rules requiring an adjusted allocation are not straightforward. In this Act they are set out in two separate sections. The Act amends ITTOIA to set out the income tax rules in the same way (in new sections 850A and 850B of ITTOIA) – see Schedule 1.