Mixed partnership - Capital allowances with P/U

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Hi

I'm trying to get to the bottom of how to deal with the partnership tax return of a mixed partnership, with two individuals and a corporate partner. 

I understand that I am required to do two separate tax computations, with one following the income tax rules and another following corporation tax rules.

When looking at the capital allowance, I'm struggling to wrap my head around the private use addbacks.

As an example, in the income tax comp, there's a car with WDA of £2,000. There is 50% private use, so 50% is added back leaving £1,000 to be claimed in capital allowances. For the company, the private use would not be added back, so there would be capital allowances of the full £2,000.

For a company, if there was a car with private use there would be a P11D (which explains why the private use is not adjusted for in the capital allowances). 

What I'm struggling to wrap my head around is how all of this interacts - do I need to do a P11D for a partner who has private use of a car in the mixed partnership? If not, there's a tax benefit to having the corporate partner if they don't need to addback for private use in the capital allowances. 

Alternatively, is there something I'm missing in the guidance that says that capital allowances are only calculated on an unincorporated basis or equivalent?

I'm really scratching my head here and there's so little online about this that I'm wondering if I've totally missed something. 

Thank you.

Replies (3)

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By FrankTax
04th Dec 2023 11:52

My view would be that taxable profits is calculated as normal* and the Company is allocated whatever share has been agreed or is reasonable based on capital invested etc.
There will most likely be a difference between the accounting profit and taxable profit and this would be an adjustment on your corporation tax computation.
*note AIA is restricted for mixed partnerships

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Replying to FrankTax:
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By unsure_accountant
04th Dec 2023 13:52

FrankTax wrote:

My view would be that taxable profits is calculated as normal* and the Company is allocated whatever share has been agreed or is reasonable based on capital invested etc.
There will most likely be a difference between the accounting profit and taxable profit and this would be an adjustment on your corporation tax computation.
*note AIA is restricted for mixed partnerships

Thanks for your reply Frank.

Are you saying that you would simply calculate the capital allowances using the rules for unincorporated businesses and then allocate the relevant proportion of those profits to the company?

Thank you for the reminder on AIA, not relevant in the case mentioned here as there's no new additions this year.

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Replying to unsure_accountant:
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By FrankTax
05th Dec 2023 08:38

Yes exactly that.
Be careful to ensure you can commercially justify the allocation to the Company, presumably it brings something to the Partnership table for which it is rewarded with profits.

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