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Where Taxpayers and Advisers Meet

Setting up a partnership 10 months after starting it

antlondon379
Posts:2
Joined:Fri May 04, 2018 9:37 pm
Setting up a partnership 10 months after starting it

Postby antlondon379 » Fri May 04, 2018 9:48 pm

Hello all. I appreciate any advice that can be given on my situation.

In July last year I started my online business. In around October, I registered as a sole trader.

My wife helps me out with this business quite a lot, but for whatever reason I never set up a partnership (or even thought about it). I just assumed there might be some way I could pay her a wage.

It turns out that a partnership might be the best way to go in terms of splitting the profits and saving tax.

If I set up a partnership now, can I state that it began in July 2017? Would HMRC allow this or wold they look at it suspiciously?

My wife hasn't registered as as self-employed yet either. Is also possible for her to register now and state that she began as self-employed in July 2017?

I got a bit lazy with organising my tax affairs and of course wish I'd done all this earlier. Just wondering what can be done from here so that my wife can receive money for the 2017-2018 year.

Thanks in advance.

TaxAdviser2018
Posts:26
Joined:Tue Apr 17, 2018 1:34 pm

Re: Setting up a partnership 10 months after starting it

Postby TaxAdviser2018 » Wed May 09, 2018 2:59 pm

In simple terms, you could consider the provisions of section (1) of the Partnership Act 1890 which remains the legislation applying to unincorported (or general) partnerships:

The definition of partnership is "Partnership is the relation which subsists between persons carrying on a business in common with a view of profit."

If you can demonstrate that the business that you carry on meets this definition, then you could register a partnership with HMRC with effect from the date that it commenced. If you consider that this is July 2017 and can demonstrate this to HMRC, then this date can be used for registering the business.

Please bear in mind that if the underlying business is commercially successful, you and your wife would enjoy the income and capital rights arising from it. You should therefore take formal advice as to the implications of setting up in partnership in terms of the tax and commercial aspects.

As a minimum, you should have a formal partnership agreement prepared to include, but not limited to, the income and capital rights attributable to the partners.

You may wish to incorporate the partnership as a Limited Liability Partnership (LLP) to take advantage of limited liability which is not otherwise available in a general partnership.


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