BLM81010 - Sale of lessor companies and similar arrangements: partnerships: effect of Schedule 10 FA 2006

The effect of Schedule 10 is different depending on whether there is a change in the partners’ interests in the partnership business or there is a change in the ownership of the partner company.

When there is a ‘qualifying change’, that is a reduction in a partner company's interest in the leasing business:

• that partner company is treated as receiving an amount of income on that day; and
• any other company that carries on the business in partnership on that day is treated as incurring an expense.

The income is treated as a receipt of the partner's notional business and the expense is treated as an expense of the other partner's notional business.

When there is a ‘qualifying change’ in the ownership of the partner company:

• that partner company is treated as receiving an amount of income on that day; and
• the accounting period of that company ends; and
• on the day following that day the company is treated as incurring an expense; and
• a new accounting period starts.

The income is treated as a receipt and the expense as an expense of the partner's notional business.

If the expense amount produces a loss the loss is not available to carry back against profits of the earlier accounting period.

Where there is both a change in the partnership sharing arrangements and the ownership of the partner company special rules ensure that the measure acts fairly, see BLM81095.