Where the profit sharing arrangements change during the basis period, this is reflected in the allocation for tax purposes.

Example 3

Ian and Peter have for several years traded in partnership. Their accounts for the year to 31 December 2015 show a profit of £16,000. Profits and losses are shared equally until 31 March 2015. From 1 April, profits and losses are shared in the ratio 7:9.

Profits are allocated in accordance with the profit sharing arrangements in force during the year to 31 December 2015 as follows:

Three months to 31 March 2015

Profits for period:

3/12 × £16,000 = £4,000

Allocated 1:1 as follows:


Ian (1/2 × £4,000)


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