WHAT HAPPENS WHEN A PARTNER LEAVES A PARTNERSHIP?
The question is often asked, what happens when a partner leaves a partnership? When a partner leaves a partnership, the remaining partner will continue the business trading as a sole trader.
A payment has been agreed for the leaving partner…
A payment agreed for the leaving partner which includes various items but mainly plant and machinery, will this element of the payment affect the capital allowances claim? Although the partnership will be ceasing and a sole-trade commencing, the business will be treated as continuing for tax purposes (if the same business is being carried on). If so, there will be no adjustments required for capital allowances purposes.
What happens with the accounts?
Separate accounts for the partnership and the new sole-trade may be required, but this does not directly affect the tax treatment. Whether the same business is carried on is a question of fact depending on the particular circumstances involved.
HMRC’s legislation states that if the same business is continuing, even with a change in the owners, the change occurring will not fall within the disposal events and so no capital allowances event has occurred. As the continuing business already owns the plant and machinery, no plant additions have been made.
Are you in a similar situation?
Would you like to find out more?
Speak to one of our friendly tax advisors at one of our offices in Tameside:
Ashton office – 0161 339 5689
Mossley office – 01457 837744