HMRC has recently updated its guidelines to clarify that a partnership containing a corporate member is eligible to assert capital allowances typically reserved for corporations. This encompasses allowances such as the super deduction and full expensing.
The computation of a partnership’s profits is contingent upon the tax regulations applicable to its members:
- In cases where all partners are individuals, profit calculations are executed under income tax rules, treating the partnership as a notional individual.
- If all partners are companies, profit calculations adhere to corporation tax rules, treating the partnership as a notional company.
- For partnerships with a mixed membership (comprising both individuals and companies), two separate computations are necessary—one for the notional individual and another for the notional company.
HMRC has revised its Capital Allowances Manual (CA 11145) to affirm that when determining the profits of the notional company, a claim can be lodged for capital allowances exclusive to companies subject to corporation tax. These allowances include the 130% super deduction and full expensing. The validity of the claim hinges on satisfying all standard qualifying conditions. It’s important to note that partnerships with at least one corporate member are ineligible to claim the annual investment allowance (AIA) when computing the profits of the notional company or notional individual. The AIA is only accessible to a “qualifying person,” defined as an individual, a company, or a partnership comprising exclusively of individuals (s38A, Capital Allowances Act 2001).
