Chapter 9: Partnerships involving companies
Overview
1176.This Chapter provides special rules for determining debits and credits on loan relationships where a money debt is owed by or to a partnership in which one or more of the members is a company.
Section 380: Partnerships involving companies
1177.This section gives the basic rule for computing the debits and credits where a money debt is owed by or to a partnership in which one or more of the members is a company. It is based on paragraph 19(1) and (2) of Schedule 9 to FA 1996.
1178.“Profession” in paragraph 19(1)(a) has not been rewritten on the grounds that a company cannot carry on a profession for corporation tax purposes either as a partner or otherwise.
Section 381: Determinations of credits and debits by company partners: general
1179.This section expands on the basic rule given in subsection (3) of the previous section. It is based on paragraph 19(3) to (6) of Schedule 9 to FA 1996. Each company partner is treated as owing or being owed the debt and the credits and debits in relation to those debts are treated as those of the company partner in its profit-sharing ratio.
1180.“Gross” in paragraph 19(5) and (6) of Schedule 9 means that the total credits and debits are calculated notwithstanding that the debt is treated as owed to or by each company partner and this is brought out in subsection (5).
Section 382: Company partners using fair value accounting
1181.This section provides that company partners using fair value accounting must bring debits and credits into account on the same basis. It is based on paragraph 19(11) of Schedule 9 to FA 1996. Without this provision it might be assumed that the deeming required by this Chapter did not require a company to adopt its normal accounting method.
Section 383: Lending between partners and the partnership
1182.This section provides the rules for determining whether a company partner controls a partnership in circumstances where a money debt exists between the partnership and a company partner. It is based on paragraph 19(7) to (9) and (14) of Schedule 9 to FA 1996. If there is such a money debt the rule in section 349 applies under which debits and credits on a loan relationship are determined under the amortised cost basis.
Section 384: Treatment of exchange gains and losses
1183.This section disapplies, in certain circumstances, the rule on exchange gains and losses in section 328 which disallows a credit or debit on an exchange gain or loss which is taken directly to a company’s reserves. It is based on paragraph 19(12) of Schedule 9 to FA 1996. Only where the exchange gain or loss by-passes the partnership’s profit and loss account will that section apply.
1184.The words “subsection (3) of section 84A of this Act does not apply …. except to the extent that ….. exchange gains and losses are recognised” in paragraph 19(12) of Schedule 9 to FA 1996 are rewritten to clarify the meaning that the section rewriting section 84A(3) applies so far as the exchange gains and losses‘ are recognised rather than the possible meaning that the section applies only if they are recognised.
1185.Subsection (2) updates the references in paragraph 19(12) of Schedule 9 to FA 1996 to a company’s statement of income and gains, etc in line with current accountancy practice.
1186.Part 2(6) of Schedule 11 to F(No 2)A 2005 repeals paragraph 19(12) of Schedule 9 to FA 1996 with effect from a day to be appointed. This section, which rewrites that sub-paragraph, will therefore cease to have effect from an appointed day (see Part 8 (loan relationships) of Schedule 2 to this Act).
Section 385: Company partners’ shares where firm owns deeply discounted securities
1187.This section treats deeply discounted securities held by a partnership as if they were held by each company partner in its profit-sharing ratio. It is based on paragraph 19(13) of Schedule 9 to FA 1996.
1188.Subsection (3)(b) adopts the language (“in accordance with the firm’s profit-sharing arrangements”) of section 1262 in Part 17 (partnerships) which rewrites section 114(2) of ICTA.
