Jennifer Adams looks at some tax tips and traps that may arise when being a member of a business partnership.
For income tax purposes a partnership has no legal existence distinct from the partners themselves (this is not the case in Scotland where a partnership is a legal person) and as such each partner is taxed on their share of profit as an individual. The effect of this provision ensures that an individual is treated as commencing their business when they start to trade, even if that was before they became a member of the partnership. Similarly cessation of their business need not necessarily be when the partnership is dissolved. One 'trap' is that as partners each is jointly liable for any debts owed by the partnership, each being equally responsible for settling the whole debt.
The principles of computation of a partnership's tax adjusted profit are the same as for any sole trader (although partner'