½Û×ÓÊÓƵ

B7.525 Partnership mergers

As partners are taxed individually on their partnership profits, the partnership itself is not treated as discontinuing following a change in partners if at least one partner carries on the business both immediately before and immediately after the change, and the partnership carries on the same business both before and after the change¹. However, where there is a complete change in the ownership of the partnership the business is treated as having ceased and recommenced.

More complex tax and commercial issues arise however if a partnership merges or demerges, as discussed below.

In some regards, a merger can be looked on as little more than the introduction of new partners into an existing partnership. However, it is necessary to consider the effect of the merger on the partners of both partnerships and not simply the one which might be regarded as predominant.

HMRC guidance discusses three possible outcomes when partnerships merge²:

1. Ìý

   •ÌýÌýÌýÌý the cessation of both partnerships and the commencement of one new partnership

2. Ìý

   •ÌýÌýÌýÌý the continuation of both partnerships,