Good morning all,
I have a question and I would be grateful fo your input.
The scenario is that there is an existing partnership with a Septemeber 2023 y/e. The 2023-24 accounts will be for the AP covering 1 October 2022 to 5 April 2024 due to the basis period reform.
In July 2024 the partnerhsip ceased (along with another partnership) and they have joined to make a larger partnership. The trade that is being carried on by this new partnerhsip is exactly the same as the old partnership.
Per FA 2022 72(6) it says The balance of the amount of the transition profits is treated as arising, and chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, for the tax year in which the trader permanently ceases to carry on the trade.
The key for me here is the wording 'permanently ceases to carry on the trade.'. I therefore take this as the respective partners can continue to spread their transitional profits for the next 5 tax years (or up to the year that they do permanenetly cease/retire). To my mind this is very much like the 'succession of trade' provisions but as these reforms are recent(ish) there isn't much by way of guidance etc.
Appreciate your thoughts on this.
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Replies (3)
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The new rules aren't somehow creating a new concept of cessation of trade that is different to what we already have.
Would you have put a cessation at July 2024 (and applied overlap relief) under the old rules? If not, then don't under the new rules.
If you're happy, having looked at the guidance RT mentions, that the trade continues then spreading will continue alongside it.
The answer might not be the same for all the partners - one trade might be seen as continuing, one not.
It's been a long time since I had to work through the notes in the manuals, but it's all set out there, as I recall.