A Revenue Statement of Practice first published in 1975 sets out how the CGT rules are to apply to partnerships. HMRC has now decided that the statement is deficient, and have recently issued Revenue & Customs Brief 03/08 to “clarify” the position. 

The specific point at issue relates to assets which are transferred to a partnership by means of a capital contribution. Previously, where no cash or money’s worth was received, the partner would not be treated as having disposed of their asset. HMRC now consider this to be incorrect. Their current view is that there will be a partial disposal equal to the fractional share in the asset which passes to the other partners, and that a sum credited to the partner’s capital account represents consideration for the partial disposal.

The Revenue will not go back on any decisions made on past events, but will apply the “correct treatment” to all other cases.

This “clarification” represents a major change for partnerships and needs to be considered carefully.

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