Brief clarifies capital contributions issue

HMRC have issued a brief clarifying their practice in relation to the treatment for capital gains purposes of a contribution of an asset to a partnership.

Statement of Practice D12 sets out HMRC's understanding of how the legislation concerning the tax treatment of partnerships works in practice although it does not deal with the situation where a partner contributes an asset to a partnership by means of a capital contribution.

In this respect HMRC consider that the partner in question has made a part disposal of the asset equal to the fractional share that passes to the other partners.

The market value rule would apply if the transfer is between connected persons or the transaction is other than by way of a bargain made at arm's length.

Otherwise the consideration to be taken into account will be a proportion of the total consideration given by the partnership...