INCOME TAX ACT 1967 (ACT 53) PART III - ASCERTAINMENT OF CHARGEABLE INCOME Chapter 8 - Special cases
Section 55. Partnerships generally.
(1) Subject to this section and sections 56 to 59, in the case of a business of a partnership (in this section referred to as the relevant partnership) and in relation to a person who is a partner in the relevant partnership throughout the period during which he was such a partner it shall for the purposes of this Act be postulated that-
(a) there has been a transfer to that person (in this section referred to as the sole proprietor) of the business and assets of the relevant partnership together with all rights and liabilities of the partners in relation thereto;
(b) the subject matter of the transfer constitutes a business (in this section and section 56 referred to as the proprietorship business) of the sole proprietor carried on by him in a manner similar to the way in which the relevant partnership business was carried on and in particular that the accounts of the relevant partnership business, made up for any period, are the accounts of the proprietorship business made up for that period.
(2) There shall be ascertained in accordance with the foregoing provisions of this section and of this Part what would be, but for any provisions of any of the following subsections, and adjusted income in this section referred to as the provisional adjusted income of the sole proprietor from his proprietorship business for the basis period for a year of assessment.
(3) The divisible income of the proprietorship business for the basis period for a year of assessment shall be taken to be an amount found by the deduction from the provisional adjusted income of the sole proprietor from that business for that period of the total amount of-
(a) any remuneration payable by virtue of any partnership arrangement of the relevant partnership to any partner therein for that period or for any part thereof;
(b) any interest payable to any partner in the relevant partnership for that period or any part thereof in connection with all capital moneys paid or advanced by him (otherwise than in a fiduciary capacity, unless in that capacity he is a partner in the relevant partnership) to the relevant partnership; and
(c) any expenses incurred during that period in relation to any partner in the relevant partnership and charged in the relevant partnership accounts (whether or not for that period) which-
(i) would have been private or domestic expenses if incurred by that partner; or
(ii) are reimbursements of private or domestic expenses incurred by that partner.
(4) The amount of the divisible income of the proprietorship business for the basis period for a year of assessment ascertained under subsection (3) shall be treated as having accrued evenly over that period and shall be divided between those who were partners of the relevant partnership in that period in accordance with the sharing arrangement (subsisting from time to time during that period) of those partners in like manner as that amount would have been divisible between those partners if that amount had been divisible profits from the business of the relevant partnership accruing evenly over that period; and so much of that divisible income as is thus found to be attributable to the sole proprietor shall be taken to be his share of that divisible income for that period.
(5) The adjusted income of the sole proprietor from the proprietorship business for the basis period for a year of assessment shall be taken to be the aggregate of-
(a) so much of the total amount deducted under subsection (3) in ascertaining the divisible income of that business for that period as relates to any remuneration, interest or expenses payable to or incurred in relation to the sole proprietor; and
(b) his share, ascertained under subsection (4), of the divisible income of that business for that period.
(6) For the purposes of subsection (3) of this section, the amount of any remuneration or interest shall be ascertained whenever necessary by applying subsection 19(3) as if references therein to Chapter 4 were references to subsection (3) of this section.
(7) In subsection (4) divisible profits shall not be taken to include any items of the kind referred to in paragraph (3) (a), (b) and (c).
