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HMRC clarifies capital allowances rules for partnerships


Published: 16 Jan 2024 Update History

HMRC has updated its guidance to make it clear that a partnership which includes a corporate member may claim capital allowances generally restricted to companies. These include the super deduction and full expensing.

A partnership’s profits are calculated in accordance with the tax rules applying to its members, as follows: 

  • where the partners are all individuals, the profits are calculated under income tax rules as if the partnership is an individual (the notional individual);
  • where the partners are all companies, the profits are calculated under corporation tax rules as if the partnership is a company (the notional company); and
  • where the membership of the partnership is mixed (ie, individuals and companies), two calculations must be prepared – one for the notional individual and one for the notional company.  

HMRC has updated its Capital Allowances Manual (CA 11145) to confirm that, in calculating the profits of the notional company, a claim may be made for capital allowances that are only available to companies within the charge to corporation tax. These allowances include the 130% super deduction and full expensing. For the claim to be valid, all of the normal qualifying conditions must be met.  

It should be noted that a partnership with at least one corporate member may not claim the annual investment allowance (AIA) in calculating the profits of the notional company or the notional individual. The annual investment allowance may only be claimed by a “qualifying person”, being an individual, a company, or a partnership of which all members are individuals (s38A, Capital Allowances Act 2001).  

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