EGL40000 - The treatment of partnerships

There are specific provisions in the EGL rules for dealing with partnerships, including General Partnerships and Limited Liability Partnerships (LLPs). In broad terms, these provisions apply in a similar way to that for corporation tax generally: they are treated as “transparent” so that each partner in a partnership that undertakes electricity generation is treated as itself undertaking its proportionate share of that electricity generation.

Qualifying partnerships

A qualifying partnership is a partnership that operates a relevant generating station and where either:

  • The generating undertaking is a single company and that company is a partner in the partnership (with the implication that there is at least one external partner), or
  • The generating undertaking is a group of companies, where there is at least one partner that is a member of the group and there is at least one partner who is not a member of the group.

F(2)A23/S291 provides that the ‘qualifying proportion’ of the qualifying partnership are to be included in the generating undertakings generation for the period.

The amount of generation attributed to a partner is determined by the partner’s proportionate entitlement to a share of the profits of the partnership. Where more than one company in the same group is a partner, the entitlements of the various group companies are aggregated.

Having attributed the generation of the qualifying partnership to the generating undertaking under F(2)A23/S291, it therefore follows that the generating undertaking will include the generating receipts and exceptional costs which are, on a fair and reasonable basis, attributable to that generation. This would include (i) a share of the receipts and exceptional costs of the partnership itself; and (ii) receipts and exceptional costs of the generating undertaking outside of the partnership that are in respect of the undertaking’s share of the generation of the partnership.

Other partnerships

The partnership rule in F(2)A23/S291 does not apply where all the partners are members of the same group of companies: there is no need to divide up the generation because EGL is charged on the exceptional generation receipts of the group as a whole.

All the receipts and exceptional costs of the generating undertaking that are linked to the generation of the partnership would then be included under the EGL provisions.

General partnership provisions

F(2)A23/S291(4) provides that the general rules for the treatment of partnerships for corporation tax apply for the purposes of the EGL. In particular:

  • CTA09/S1258 provides that a firm (such as a Scottish partnership) is not to be regarded as an entity separate and distinct from the partners.
  • CTA09/S1273 provides that where an LLP carries on a business with a view to profit then it is treated in the same way as an ordinary partnership. The fact that an LLP is a body corporate is therefore ignored for EGL purposes.

Joint contractual arrangements

It is possible that a generating station may be operated by more than one person through a contractual relationship that does not amount to a partnership. In that case each party should include their receipts and costs from the generation activity in accordance with their contractual agreement.