You should also use the three-stage approach set out at CTM36510 where it is necessary to calculate and apportion a particular item of income or expense if different classes of partner are to be taxed by reference to different rules.
A UK partnership has two corporate members; Company A - a UK
resident, and Company B - a non-resident. Profits are shared
equally. The partnership’s worldwide profits taxable under
Case I Schedule D amount to £10,000 of which £7,500 is
earned in the UK.
Computation for UK resident partner
Step 1 Calculate the profits as if all the members
were UK resident companies:
Profit £10,000.
Step 2 Allocate that profit between all the
members:
Company A £5,000.
Company B £5,000.
Step 3 Assess Company A on its share of that
profit:
£5,000.
Computation for non resident partner
Step 1 Calculate the profits as if all the members
were non-resident companies:
Profit £7,500.
Step 2 Allocate that profit between all the
members:
Company A £3,750.
Company B £3,750.
Step 3 Assess Company B on its share of that
profit:
£3,750.
