Tax in a partnership

[JamesAOK]

Hello,

Would any of you experts be kind enough to explain exactly what me and my business partner will need to pay once we are set up? We are looking to start importing and selling online. I'm finding it quite difficult to get my head around what the 20% tax is actually paid on. Turnover or profit?

Thanks for any guidance you can give.

[bd6759]

Income tax is charged on the profits of a trade.

VAT is payable on the turnover, assuming you are VAT registered and making a taxable supply.

Perhaps you could explain your question better?

[JamesAOK]

Income tax is charged on the profits of a trade.

VAT is payable on the turnover, assuming you are VAT registered and making a taxable supply.

Perhaps you could explain your question better?

Thanks for your response.

We won't be VAT registered, at least to begin with as we won't be turning over the required amount.

I'm confused as to how we pay our tax in a partnership. Do we pay tax on the profits we make as a partnership, or do we both submit separate tax returns on the money we have individually received?

Hope this makes sense.

[SteLacca]

The profits are divided between you according to your partnership share/agreement/50-50 etc. The partnership submits a partnership tax return, which will not give rise to a tax liability, and you will each submit a personal return including your share of partnership profits, and will pay tax on your respective shares.

[JamesAOK]

The profits are divided between you according to your partnership share/agreement/50-50 etc. The partnership submits a partnership tax return, which will not give rise to a tax liability, and you will each submit a personal return including your share of partnership profits, and will pay tax on your respective shares.

Thanks for your response. So we only pay tax once on the profit we each receive from the business?

Does that tax apply to money that is reinvested in stock?

[AnthonyR]

You only pay tax on the profits - stock is an allowable expense for the business so will reduce your profits and hence your tax.

[bd6759]

Thanks for your response. So we only pay tax once on the profit we each receive from the business?

Does that tax apply to money that is reinvested in stock?

Since you appear to know nothing about how profits are calculated, you should enagage an accountant or business advisor to see you through the initial stages of the partnership. You are required to take reasonable care when calculating you profits: stumbling about in the dark falls short of that standard and you could easily end up in trouble with HMRC.