Income Tax (Trading and Other Income) Act 2005 section 855

Basis periods for partners' notional businesses

Section 855 sets out the rules for determining the basis periods used to assess a partner's share of non-trading income from a firm that carries on a trade.

• The general rule is that the basis period for a partner's notional business (non-trading income) is the same as the basis period for the partner's notional trade.
• Where a sole trader forms a partnership by bringing in another person to carry on the same trade, the original trader's notional business is treated as starting when the partnership is formed, not before.
• Where a partnership dissolves and one partner continues the same trade alone, that partner's notional business is treated as ceasing when the partnership permanently stops trading.
• There are no special basis period rules for a partner's share of taxed income, or for untaxed income from a firm that does not carry on a trade — the normal tax year basis applies in those cases.