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This guidance note sets out the treatment of corporate partners in a partnership, how any profit or losses are calculated and allocated to the partners and then how they are reported on the corporate tax return.

The insertion of corporate partners, usually as members of a limited liability partnership (LLP), has become a popular structure. This is particularly true following the divergence between corporation tax and income tax rates. For more detail on inserting a corporate partner see the Introducing corporate partners guidance note.

However, targeted anti-avoidance legislation applies to counter planning involving mixed partnerships, ie where a partnership is made up of a mixture of individuals and non-individuals (eg a company). The rules require excessive profits allocated to a company to be reallocated to other individual partners. Excessive losses allocated to an individual partner are also subject to the rules see the Partnership anti-avoidance provisions guidance note for further details.

It should be noted that partnerships may also be impacted by the loans to participators rules for close companies ― see the Loans to participators