This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

How to deal with partnership accounts following death of partner

alltimetax
Posts:2
Joined:Tue Aug 27, 2019 8:23 pm
How to deal with partnership accounts following death of partner

Postby alltimetax » Tue Aug 27, 2019 8:36 pm

My Dad died in January 2016. On the date of his death, he had a business partnership with my Mum. The partnership had been running in one form or another for around 20 years, but at the date of death my Mum was doing all of the work for it and was splitting the profits with my Dad 80/20 in her favour.

There was no formal partnership agreement, and the partnership wasn't mentioned in my Dad's will. Am I therefore correct in thinking that the partnership ceased to exist on my Dad's death, and that any work my Mum did after that date she did as a sole trader?

Also, the accounting period for the partnership ran from April 13th through to April 12th of the subsequent year. This meant that when my Mum submitted the SA800 for the 2014/15 "partnership" year, the profits from that year were allocated to my Mum and Dad's 2015/16 self assessments and they paid income tax on that basis. What should we do with the money that was owed to my Dad by the partnership in the 2015/16 "parternship" year (i.e., the year my Dad died)? Should it be included on his final self assessment, i.e. the one for the 2015/16 income tax year, or should we file a 2016/17 self assessment even though he wasn't alive for any of that period?

And yes, I know these tax returns are all very late and I'm braced for whatever fines HMRC throw our way...

Jholm
Posts:108
Joined:Mon Mar 11, 2019 4:22 pm

Re: How to deal with partnership accounts following death of partner

Postby Jholm » Wed Aug 28, 2019 11:42 am

Essentially you are correct re: the partnership to sole-trader transition.

Given the amount of potential tax/interest/penalties at stake, I would STRONGLY suggest that you appoint a professional immediately to deal with this. Partnership penalties are applied by partner so your mum and dad would both incur £1,000s of penalties each. A good advisor, with the right background provided and a well-worded appeal, may well be able to save you a LOT of money.

pawncob
Posts:4573
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: How to deal with partnership accounts following death of partner

Postby pawncob » Wed Aug 28, 2019 5:06 pm

The partnership ceased on his death and accounts should have been prepared to that date. If they weren't, the profit share for the accounting year (apportioned) can be used to determine your father's "share", which forms part of his estate. SA800s should be submitted on an actual basis to report the profits.
With a pinch of salt take what I say, but don't exceed your RDA

alltimetax
Posts:2
Joined:Tue Aug 27, 2019 8:23 pm

Re: How to deal with partnership accounts following death of partner

Postby alltimetax » Thu Aug 29, 2019 12:19 pm

Thank you, @pawncob, @Jholm. It sounds like submitting a late SA800 for the curtailed partnership year 2015/16 and including my Dad's share of the profits from that on his 2015/16 income tax self assessment is the right way to go.

And yes, I have a tax professional on hand to navigate the appeals. I'm really not happy about the situation, but only became aware of it a couple of months ago so have only been able to begin untangling and rectifying it recently.


Return to “Business Tax”