Part 9Partnerships

Calculation of partners' shares

F1850EPayments by B out of the excess part of B's profit share

(1)

Subsection (2) applies in a case in which section 850C(4) or section 850D(4) applies if—

(a)

there is an agreement in place in relation to the excess part of B's profit share,

(b)

as a result of the agreement, B makes a payment to another person out of the excess part of B's profit share, and

(c)

the payment is not made under any arrangements the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage for any person.

(2)

For income tax purposes, the payment—

(a)

is not to be income of the recipient,

(b)

is not to be taken into account in calculating any profits or losses of B or otherwise deducted from any income of B, and

(c)

is not to be regarded as a distribution.

(3)

In this section—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

“B's profit share” has the same meaning as in section 850C or 850D (as the case may be),

“the excess part of B's profit share” means so much of the amount of B's profit share as is represented by the amount of, as the case may be—

(a)

the increase under section 850C(4), or

(b)

A's share of the firm's profit under section 850D(4), and

“tax advantage” has the meaning given by section 1139 of CTA 2010.