PM163380 - Partners in disagreement

An individual partner may meet an expense that other partners do not agree is an expense of the partnership. If the partnership does not bring the expense into the accounts, or, if exceptionally the expense is not brought into the accounts, otherwise include it in the partnership return then it is not an allowable deduction and the individual cannot claim the expense separately.

Example:

The SRY LLP operates a property business which lets a large number of residential properties.

Sarah thinks it would be a good idea if the partnership had a survey of how energy efficient the properties are.

John and Karen consider that they should not carry out a survey as they do not currently have funding to carry out work recommended by the survey.

The cost of the survey means that all three partners have to agree for it to be carried out.

Sarah decides to go ahead with the survey and pays for it herself.

This is not an expense of the partnership business, and is not deducted in arriving at the profits of the partnership property business.

Sarah cannot separately claim the expense against her share of the partnership profits on her individual return.

The costs of disputes between partners are not expenses of the activity carried on.