Partners in a non LTD Company

[tleckie]

Hi, does anyone know how mucha partner in a non-limited company can earn before having to pay tax?

Many Thanks

[King_Maker]

I am not sure I understand the question.

Do you mean a director in an *unlimited* company?

Or a partner in Partnership?

[tleckie]

Sorry I was imprecise. I mean a partner in a partnership.

Thanks

[King_Maker]

Generally speaking, it would be £4895 which is the current standard Personal Allowance for 2005-06 Income Tax year.

A partner is not taxed on his drawings (even if termed "salary"), but his/her share of the partnership profits.

[tleckie]

Thank you.

Do profits have to be shared equally between partners for taxation purposes, or can they be allocated differently - subject to the partners agreeing, of course!

[King_Maker]

No, the partners can split the profits between/among themselves on any basis, assuming they agree.

However, particularily with husband & wife partnerships, HMRC are likely to look closely where the profit sharing ratio is weighted in favour of any non-active spouse. HMRC are of the opinion (not one I necessarily share) that the Settlements legislation (currently being used in the "Artic Systems" case) can be invoked to shift the tax liability back to the "active" spouse.