trading allowance ST and Partnership

can it be claimed

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When the trading allowance first came out there was some talk about HMRC closing the "loophole" where a Sole Trader who had an additional partnership could still claim the allowance on the ST.

Is it still the case that a ST with a second income from a partnership can still claim the allowance on the ST income?

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By Geoff56
28th Jun 2022 10:09

It is my understanding, based on the following, that someone who has partnership income, cannot claim the trading income allowance:

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim86032

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-...

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By fawltybasil2575
28th Jun 2022 11:41

@ Winnie Wiggleroom (OP).

The legislation is at S.783AP of Finance (No.2) Act 2017, ie:-

https://www.legislation.gov.uk/ukpga/2017/32/schedule/3/enacted?view=plain

The GOV.UK guidance (per Geoff’s first link) paraphrase that legislation. However, I would respectfully point out that Geoff has inadvertently misunderstood that guidance. It refers to circumstances where the sole trader’s taxable SOLE TRADE INCOME ITSELF includes INCOME FROM a partnership with which he is “connected”, and is thus effectively of an anti-avoidance nature. Section 783AQ, in identical vein, disqualifies the sole trader from the Trading Allowance where there is income from a limited company to which the sole trader is “connected”.

I would surmise that your initial understanding might have arisen from a similar misunderstanding (by others) of the legislation.

Basil.

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Replying to fawltybasil2575:
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By Geoff56
28th Jun 2022 14:57

I stand corrected. Thank you Basil, for your masterful exposition of the matter.

In my defence, I would venture that HMRC's guidance, in particular the second link, in its pursuit of simplicity, has ended up being somewhat misleading.

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Replying to Geoff56:
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By Paul Crowley
28th Jun 2022 15:07

'HMRC's guidance, in particular the second link, in its pursuit of simplicity, has ended up being somewhat misleading.'
The new normal

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Replying to Paul Crowley:
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By Hugo Fair
28th Jun 2022 16:19

Not that new ... it all started (the rapid descent) with the advent of GOV.UK as the replacement of hmrc's previously published guidance.

Around that time, I was at an HMRC conference when I stood up and congratulated them on the style of GOV.UK and its accessibility by the untrained.
As they preened themselves, I added my further congratulations on having saved money ... by apparently employing a bunch of Readers' Digest journos to do the writing.
The smiles froze ... and I was ejected (yet again)!

But the determination to sacrifice detail & accuracy on the altar of 'ease-of-use' continues to this day .. and has now reached beyond causing potential confusion, to the point of promulgating factual inaccuracies.

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Replying to fawltybasil2575:
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By Winnie Wiggleroom
29th Jun 2022 09:08

fawltybasil2575 wrote:

@ Winnie Wiggleroom (OP).

The legislation is at S.783AP of Finance (No.2) Act 2017, ie:-

https://www.legislation.gov.uk/ukpga/2017/32/schedule/3/enacted?view=plain

The GOV.UK guidance (per Geoff’s first link) paraphrase that legislation. However, I would respectfully point out that Geoff has inadvertently misunderstood that guidance. It refers to circumstances where the sole trader’s taxable SOLE TRADE INCOME ITSELF includes INCOME FROM a partnership with which he is “connected”, and is thus effectively of an anti-avoidance nature. Section 783AQ, in identical vein, disqualifies the sole trader from the Trading Allowance where there is income from a limited company to which the sole trader is “connected”.

I would surmise that your initial understanding might have arisen from a similar misunderstanding (by others) of the legislation.

Basil.

This was the original reference from the ATT https://www.att.org.uk/new-trading-allowance-simplicity-not-we-know-it (under Second Trades) where they suggested that some future clarification from HMRC might be forthcoming, I have seen no such clarification to contradict the original ATT position, and I see nothing in the legislation that prevents a claim where other income comes from a partnership, provided of course that as you say the ST income itself does not come from a partnership.

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