This Tax Tribunal decision concerned the treatment of additional payments, made by a firm of chartered accountants, to two of their partners who had been asked to withdraw.

In addition to paying the profit share up to the date of withdrawal, the firm made an additional payment equivalent to a profit share for a full twelve month period. The Tribunal was asked to consider the tax treatment of the additional payments in the hands of the recipients, and also their deductibility or otherwise in relation to the partnership.

The Tribunal Chairman seems to have relied heavily on the relevant partnership constitutional arrangements and documents in coming to her decision, while acknowledging that their meaning mightn’t be entirely dependent on the words used. She concluded that the additional payments had to be regarded as coming out of the profits of the partnership, and hence taxable in the individual partners hands and not deductible from the assessable profits of the partnership as a whole.