Claiming Capital Allowances in Partnerships, including LLP’s

Partnerships where all members are subject to income tax

Where all members are subject to income tax, capital allowances are claimed in the partnership or LLP tax return as a deduction from profits. These are then feed through to the individual’s tax returns, by way of the distribution of the partnership profits or losses.

Partnerships where all the members are corporate members.

In this instance, the partnership is deemed to be a “notional company”. Partnership profits are calculated as if the partnership were a company, with corporation tax rules applying. HMRC confirms that the tax computation can include claiming capital allowances that are only available to companies that pay corporation tax. Including first-year allowances such as super-deduction and full expensing, as long as the “notional company” meets the criteria for each allowance. However, this does not include Annual Investment Allowance (AIA) (see below).

Mixed partnerships, where one or more partners are a corporate member

In this instance, where one or more partners are corporate members, HMRC has confirmed that the corporate member can claim first-year allowances such as super-deduction or full expensing. This can be claimed against its share of the partnership profits. But again it should be noted that AIA is not available to the corporate member as noted below.

In the case of mixed partnerships, it may be necessary for the partnership to submit two tax returns. One in respect of the members who are not corporate members. A second tax return for those members who are subject to corporation tax, regarded by HMRC as a “notional company”.

Annual Investment Allowance where the partnership has a corporate member

HMRC gives clear guidance about claiming AIA. Stating that AIA is only available to a partnership in which all its members are individuals (CAA2001/S38A).