BIM72001 - Partnerships - general notes: Definition

Section 1(1) Partnership Act 1890 defines ”Partnership” as “the relation, which subsists between persons carrying on a business in common with a view of profit”.

“Persons”; includes artificial as well as natural persons so an individual, a body corporate or the trustee of a settlement may all be partners. In England, Wales or Northern Ireland a partnership is not in law a legal person; so one partnership cannot become a member of another partnership, though the members may do so. For the position of partnerships in Scotland see BIM72035.

You should note that a partnership, although it may not be a legal person, is still a “person” for all purposes of the Taxes Acts unless the contrary intention appears. This follows from Schedule 1 Interpretation Act 1978 which defines a “person” as including “a body of persons corporate or unincorporate”. And a partnership is a “body of persons unincorporate”.

“Business”; is defined by Section 45, Partnership Act 1890 as “including every trade, occupation or employment”. So “business” is a very wide term, embracing almost every commercial activity, and is much wider than “trade” or “profession” alone. It includes a business of making investments.

“With a view of profit”, distinguishes partnerships from clubs and societies which do not have a profit seeking motive, and also from arrangements only to share expenditure, where each person keeps their own income, for example some dentists or medical practitioners with joint surgeries, or some crop-sharing agreements.

Partnership is a relationship resulting from a contract or agreement, oral or written. The implementation of that agreement creates the partnership relationship. If it is not implemented, it is not effective (Dickenson v Gross, 11TC614).