Staffordshire based Capital Allowance expert, Chris Roberts has provided essential insights in response to the recent update from HMRC on 16th January 16th 2024, regarding the claiming of capital allowances in partnerships.

Roberts has shed light on the implications for various partnership structures, with key highlights.

He said: “There have been crucial updates from HMRC about its guidance on claiming capital allowances in partnerships and clarifying the position of the claiming of allowances by a corporate member.”

Where all members are subject to income tax, capital allowances are claimed in the partnership or LLP tax return as a deduction from profits, then feed through to the individuals tax returns by way of the distribution of the partnership profits or losses.

In regard to partnerships where all members are corporate members, Chris explained that “the partnership is deemed to be a “notional company” and partnership profits are calculated as if the partnership were a company, with corporation tax rules applying.”

HMRC has confirmed that the tax computation can include claiming capital allowances that are only available to companies that pay corporation tax, including first year allowances such as super-deduction and full expensing, as long as the “notional company” meets the criteria for each allowance. However, this does not include the Annual Investment Allowance.

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“Where one or more partners are a corporate member”, Roberts added, “HMRC has confirmed that the corporate member can claim first year allowances such as super-deduction or full expensing against its share of the partnership profits, but again it should be noted that AIA is not available to the corporate member.”

He also commented, “In the case of mixed partnerships, it may be necessary for the partnership to submit two tax returns, one in respect of the members who are not corporate members, and a second tax return for those members who are subject to corporation tax, regarded by HMRC as a “notional company”.”

Roberts has worked at Capital Allowance Review Services for over ten year analysing commercial property transactions, specifically for Capital Allowances.