A partnership is a business structure where two or more individuals work together with a view to make profits. If your business is run as a partnership, then you are required to file a partnership tax return each year.
When a partnership is formed, it must be registered immediately with HMRC by the nominated partner. The nominated partner is responsible for completing the partnership tax return, which will show the details of the partnership profits or loss, as well as the details of each partner’s share of profits and losses on partnership statement.
Partnership is required to file an annual return but it is not a taxable entity in itself so there is no concept of a partnership tax liability. It is the individual partners who pay the tax.
Once the taxable profits of the partnership are calculated, these will be allocated to the partners based on the profit sharing ratios. The individuals need to include their profit shares in their personal tax returns and to file these with HMRC.
The deadline to file a partnership tax return is the normal self-assessment filing deadline, normally 31 January following the end of the tax year.
If the partners fail to file the partnership tax return on time, every partner who was a partner at any point during the period in respect of which the return is required will be liable to a £100 late filing penalty.
At Martax, we can help you with the following:
- Calculation of the adjusted profits of the partnership
- Profits allocation based on the profit-sharing ratio
- Preparation of the partnership tax return and the submission of the same with HMRC
- Preparation of individual’s partners returns including profit shares from partnership and the submission of the same with HMRC
- Advice on the payment of tax liabilities and the due dates
If you need any help or advice in relation to the above, please let me know.