If you have formed a partnership to carry out business, it must be separately registered with HMRC, even if all partners were previously registered as self-employed. All registrations must now be completed online. Registered Limited Liability Partnerships registered with Companies House have different rules and will be treated as company for tax purposes.
WHAT YOU NEED TO KNOW ABOUT PATENERSHIP TAX RETURNS
As a business partner you must pay class 2 NIC and HMRC must be notified by 31st January following the tax year end during which you became a partner. Partners are also taxed on their share of the firm’s profits with each partner being taxed in the same way as a self-employed individual. It is therefore important to put sufficient money aside to make this payment.
HMRC Deductions : When calculating taxable profits, HMRC takes into account deductions for expenses e.g.:
Tax must be paid on the entire profit of a trade divided between partners. Partners wages are non deductible.
Tax is collected through tax returns including self-assessment forms indicating liability for capital gains and income tax. Partnership returns must also be submitted showing the partnership’s profit and loss accounts with adjustments for tax. Penalties are issued automatically for late filing. Although partnership returns can be filed over the internet, HMRC have no free software to do this and therefore suitable software needs to be purchased for this purpose. Alternatively, you could use the services of a skilled accountancy firm such as The Accountancy Solutions who can do the hard work for you and who can ensure that your paperwork is completed correctly and in a timely manner. This will ensure that you do not pay too much or too little tax and that you do not face a penalty.