Wallace v Revenue and Customs (INCOME TAX - partnerships - meaning of s.849(3) Income Tax (Trading and Other Income) Act 2005 - whether non-UK resident partner chargeable to income tax on their share of partnership profits derived from UK trading activities with non-UK counterparties) [2025] UKFTT 790 (TC) (25 June 2025)

Wallace v Revenue and Customs (INCOME TAX - partnerships - meaning of s.849(3) Income Tax (Trading and Other Income) Act 2005 - whether non-UK resident partner chargeable to income tax on their share of partnership profits derived from UK trading activities with non-UK counterparties) [2025] UKFTT 790 (TC) (25 June 2025)

Section 849(3) ITTOIA 2005 requires that, for a non-UK resident partner, the profits of the partnership are calculated as if the partnership were a non-UK resident individual, but the calculation is based on the actual trade carried on by the partnership. Where the partnership's trade is carried on wholly in the UK, the non-UK resident partner is taxable on their share of the entire profits, regardless of whether the income is derived from UK or non-UK lessees.

Citation
[2025] UKFTT 790 (TC)
Parties
Appellant: Mark Wallace; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
25 June 2025
Procedural Posture
Income Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Decision
Outcome
Appeal dismissed
Legal Topics
Income Tax, Partnerships, Non UK Resident Taxation, Section 849(3) ITTOIA 2005, Territorial Scope of Taxation
Tax Law Income Tax Partnerships Non UK Resident Taxation Section 849(3) ITTOIA 2005 Territorial Scope of Taxation

Case Brief

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Parties

Mark Wallace

Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal (tax Chamber) Substantive Decision

Legal Issues

  1. 1 Whether a non-UK resident partner is chargeable to UK income tax on their share of partnership profits derived from UK trading activities with non-UK counterparties under section 849(3) ITTOIA 2005.

Ratio Decidendi

Section 849(3) ITTOIA 2005 requires that, for a non-UK resident partner, the profits of the partnership are calculated as if the partnership were a non-UK resident individual, but the calculation is based on the actual trade carried on by the partnership. Where the partnership's trade is carried on wholly in the UK, the non-UK resident partner is taxable on their share of the entire profits, regardless of whether the income is derived from UK or non-UK lessees.

Court Disposition

Appeal dismissed

Orders

  • Closure Notices upheld; Mr Wallace is liable to UK income tax on his share of the profits of the Partnerships for the relevant years.