Taxation Of Partnerships

A Taxation Of Partnerships is a business structure where there are more than one person running and owning the business with the view of making profit. The people who own and run a partnership are called partners.

Partnerships can take many forms. Legal persons other than individuals can also be partners in a partnership.

https://www.gov.uk/set-up-business-partnership/register-partnership-with-hmrc

Generally, for tax purposes each partner is treated as receiving their share of the income and expenses of the partnership as they arise. This treatment is overridden in particular cases by anti-avoidance legislation intended to prevent partnership structures being used to avoid (or reduce) tax.

Partnerships may split profits between their partners equally, or unequally if this can be commercially justified, for example if one partner does more of the work of the business or has invested more money in the business.

There are two main types of partnership, a conventional one with two or more partners in the business. There is also a limited liability partnership or LLP, this more complex structure provides partners with the protection of limited liability, as afforded by a limited company.

In order to register a partnership with HMRC, the following forms need to be completed (where applicable):

• Form SA400 – Registering a partnership for Self-Assessment
• Form SA401 – Registering a partner for Self-Assessment and Class 2 NICs
• Form SA402 – Registering a limited company, trust or another partnership as a partner

The registration forms should be filed with HMRC within six months of the end of the tax year the partnership commenced.

LLP’s are automatically registered with HMRC upon registering with the Companies House, which is mandatory for these types of partnership. This means that there is no need to need to submit Form SA400. However, it is important that details of the partners are filed with HMRC using Forms SA401 and/or SA402.

HMRC should also be notified when new partners join an existing partnership, using forms SA401 or SA402.

Taxation Of Partnerships

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