Partnership interests

Dealers’ partnership profits

The taxpayers were financial dealers in the Investec group. They participated in transactions designed so they could exit from leasing partnerships ie those in which all the capital allowances had been taken so that rentals would be taxable in full without being taxed on rental income or balancing charges. They said they should be taxed on the net profits from their activities deducting the costs of purchasing the partnership interests from the rentals or the sale proceeds of the rentals received while they were the relevant partners.

HMRC said the relevant costs were non-deductible or the taxpayers should be taxed on the net profits in their respective sole financial trades as well as on the entire partnership profits.

The First-tier Tribunal described this case as ‘very interesting and difficult’. It decided the taxpayers had been conducting two trades. One was the sole financial...