Partnership Business – What Are The HMRC Requirements?Written on September 21, 2017 by Kirk Rice LLP
I set up a business with a friend around a year ago on a part time basis as we both have other jobs. We were not too sure how successful the business would be but it has generated a reasonable amount of income and profits. What do we need to do with regards to declaring our profits with HMRC?
Because you have set up the business with a friend, your business is a partnership. In a partnership you and your partner will personally share responsibility for the business. This includes any losses your business makes, and bills for things you buy for your business such as stock and equipment.
Partners share the business’s profits and each partner pays tax on their share. Partnerships are required to complete a partnership tax return each year, although I find this description a little misleading as partnerships in themselves do not pay tax. The purpose of the partnership tax return is to record the income and expenses of the business, and to record how the profits are divided between the partners. Often the profits are divided equally, but this is not always the case, and depends on what has been agreed between the partners.
When you set up a business in partnership you need to;
- Choose a name
- Choose a ‘nominated partner’
- Register with HM Revenue & Customs (HMRC)
The ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records.
Business names
You can trade under your own name, or choose another name for your business. You do not need to register the name. Business partnerships must not include words in their name which suggests they are an incorporated business when they are not, such as ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’, or ‘PLC’. You should also ensure that the name is not the same as an existing trade mark.
Register the partnership
You must register your partnership for Self Assessment with HMRC if you are the nominated partner. This means that you will be responsible for submitting the partnership tax return each year. The partners will need to register separately for personal self-assessment and they will be responsible for submitting their own personal tax returns.
You must register by 5 October in your business’s second tax year, or you could be charged a penalty. As you started your business a year ago then you must ensure you have registered it by 5 October 2019. The easiest way to register is online.
If you would like more advice regarding this issue or any other tax matter, please contact one of our Tax Partners, Graham Jennings on 01344 875 000 in our Ascot office or Hadley Baldock on 0208 789 8588 in our Putney office or email info@kirkrice.co.uk.
If you would like to receive Taxing Times electronically, simply email info@kirkrice.co.uk stating Taxing Times Article in the subject heading and we will add you to our distribution list.
Correct as of 19/6/2019
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The FCA does not regulate tax and trust advice.
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