A new partnership? Start here...

This freeview 'At a glance' guide is essential reading for anyone thinking about starting up a new partnership.

If you are starting a new business and you want to consider other types of trading vehicle, check out A new business? Start here.

Forming a partnership

You have decided to form a partnership. Where do you go from here?

Article & link	What you get
Partnerships: Unlimited or limited?	This guide considers what a partnership is and how it is defined. There are three types of partnership: unlimited (conventional) partnerships, limited partnerships and Limited Liability Partnerships (LLPs). All have different attributes: which is best for you?
When does a partnership exist?	It is not always clear when a partnership exists. Some common arrangements between parties do not always result in a partnership. This guide explores the rules.
Mixed members: Partnerships with company members	Partnerships aren't restricted to having individuals as their members: companies can be partners too. What needs to be considered?
Running a LLP in tandem with a company	It is possible to run a Limited Liability Partnership (LLP) or other form of partnership in tandem with a company. Partnerships can also have corporate partners. What needs to be considered?
Employment status: Partners	What is the employment status of a partner in a partnership or a member of a LLP? Are partners/members employed or self-employed?
Salaried members: When is a partner taxed as an employee?	In some circumstances, LLP members are taxed as employees under PAYE. When does this apply?
Partnership agreements: What should be considered?	You have decided on what type of partnership to form and with whom. Partnership agreements can be invaluable to clarify everyday matters and settle disputes within a partnership. What sort of things should be discussed for inclusion in a partnership agreement?

Once the partnership is formed

The partnership has commenced in business, attention turns to tax compliance. Do you need to register for VAT, as an employer or as a contractor?

Article & link	What you get
Record keeping & tax: What, how and until when?	All businesses must keep records. What is needed?
Starting in business: VAT Registering for VAT Is voluntary VAT registration worthwhile?	When does the partnership have to register for VAT? If it is not obliged to register, is voluntary registration worthwhile?
Making VAT Digital	All VAT registered businesses fall within Making VAT Digital from April 2022.
RTI: Real-Time Information for PAYE National Living Wage rates/National Minimum Wages rates	Will the partnership have any employees? After registering as an employer, wages will need to be reported to HMRC via RTI.
CIS: Contractors and Subcontractors	Will the partnership be operating within the construction industry? The Construction Industry Scheme may apply.
Register of Persons with Significant Control	From 6 April 2016 all companies and Limited Liability Partnerships (LLPs) are required to maintain a register of Persons with Significant Control (PSC) which must be kept with their statutory records and be available for inspection upon request.

What about Self Assessment and Income Tax?

Don't forget the partnership and partners will have self-assessment reporting obligations.

Article & link	What you get
Self-employment: Registering for Tax	You are self-employed, you have started working for yourself, what do you need to do now? How to register for tax.
Making Tax Digital	General partnerships are expected to join Making Tax Digital for Income Tax at some point in the future.
Partnerships: How to prepare partnership and partners tax returns	How are partnership profits calculated? How are corporate members of partnerships taxed? What are the differences between the tax treatment of individual and corporate partners? Are there anti-avoidance provisions to consider?
What expenses can I claim?	Different tax rules apply for different types of expense. These guides summarise the rules, advise you on planning points and tax-traps and with worked examples illustrate what you can and cannot claim.
Essential know-how	This section is for the self-employed and is full of tax planning guides and tips & tools together with tax compliance checklists.
Partnerships: Losses	How are losses treated for partnerships? What loss reliefs are available to partners and what restrictions are there?
Disputed profit share: What do I put in my return?	Partners are assessed on the profits that they are allocated on the partnership tax return. What happens when there is a partnership dispute?

The next steps

Planning for the future. What happens next?

Article & link	What you get
A guide to incorporation: Start here Incorporation of partnership: Step-by-step Incorporating an existing business	Has the time come to consider incorporating the partnership? How do you go about incorporation?
CGT: Rollover Relief	If the partners or partnership are considering disposing of capital business assets standing at a gain, Rollover Relief can defer Capital Gains Tax (CGT) charges.
Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a business	Where partners dispose of all or part of their interest in the partnership, or personal assets used in the partnership, Business Asset Disposal Relief (BADR) can reduce the CGT payable. Early planning is advisable to meet the BADR conditions.
CGT: Holdover/Gift Relief	If any partners are planning to gift their partnership interest, or assets used in the partnership, Gift Relief can hold over capital gains arising.
IHT Business Property Relief: Estate planning	Whether partners make lifetime gifts or retain their partnership interests until death, qualifying for Business Property Relief (BPR) can prevent significant Inheritance Tax liabilities arising.

Turn those acorns into oaks 😂

Join thousands of accountants and advisers (and their clients) who use www.rossmartin.co.uk as their primary TAX resource.

Register with us now (for free😍) to receive our FREE weekly SME Tax News update, tax tips and tools.

Popular