Partnership Annuities

Under ICTA88/S628(1) a partnership annuity has to be provided for under the partnership agreement (or other document). This legislation also provides that ‘the payments shall be treated as earned income of that person’.

Where the partnership itself is paying the annuity to a retired partner, the capitalised value of the annuity is regarded as consideration paid to the retiring partner for their fractional share of the partnership assets, TCGA92/S37(3). The provisions of Section 37(3) over-ride the general rule in subsection (1) that receipts which are liable to Income Tax or Corporation Tax on income are not taken into account as disposal proceeds.

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