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Computation of partnership losses

A partnership's losses are calculated using the same principles as would be used for calculating a partnership's profits.

A partnership will draw up its own accounts. Although a partnership is not itself a taxable entity, it will also have to prepare its own tax computations.

Any profit or loss shown in the partnership's accounts will need to be adjusted for tax purposes. In most cases this will increase a profit, reduce a loss, or turn a loss into a profit, because the adjustment will often involve adding back any expenses that are disallowable for tax purposes. Any interest or salary paid to the partners must also be added back.

For more details on calculating partnership profits and losses generally, see Practice Note: Taxation of general partnerships—Partnership tax computations and partnership returns.

Allocating losses between partners

Once the partnership's