Partnerships are required to submit a specific Self Assessment tax return [note 1] and supplementary pages are available for certain kinds of income of the partnership. [note 2] The return also requires details of the profit allocation in force for the accounting periods covered by the return. HMRC sends the partnership return to the "nominated partner" i.e. the partner who has been nominated by the other members of the partnership to complete the return.
There are no assessments on the partnership under Self Assessment [note 3]. Instead each partner is assessed on his or her share of the partnership profits and each partner is solely responsible for the tax due on that share. There is no joint and several� liability arising from a partner’s tax debts [note 4]. Individual partners need to include their share of any partnership profits in their own Self Assessment Tax Return.
The nominated partner in the partnership will need to fill in;
There is a short form of the statement for partnerships with only trading profits and taxed interest and a longer version for partnerships with other sources of income or capital gains. Details from the accounts must be shown in part of the form known as Standard Accounting Information (SAI). If profits are under £15,000, only turnover, expenses and net profit need be shown. If profits are above £15 million, accounts must be submitted and the SAI is not completed. In all other cases accounts in support of the SAI are note required to be submitted unless requested by HMRC.
The statutory filing date for a partnership will depend on whether the partnership consists of individual or corporate partners or a mixture of both:
If the time limits for filing a partnership return are not met fixed penalties will arise. And in more substantial cases additional daily penalties may be sought.
The initial fixed penalty will be £100 for each partner who was a member in the partnership during the period covered by the return and will be charged on individual partners not the partnership. If the return is still outstanding 6 months after the filing date there will be a further fixed penalty of £100 per partner unless daily penalties have already been sought.
There is no provision for fixed partnership penalties to be restricted where the tax due on partnership profits is minimal.
In addition to the fixed penalties a daily penalty of up to £60 per relevant partner per day may be imposed if leave is given by the Commissioners. The daily penalties apply for each day on which the failure to file continues following the date that the Commissioners gave leave. As with fixed partnership penalties, daily partnership penalties will be charged on individual partners not the partnership.
Senior employees in professional firms are often described as partners whilst retaining their salaried employee status (salaried partners). They remain liable to income tax as an employee, with NIC also being payable as applicable.
The profit share of a company acting as a partner in a partnership for the relevant accounting period is liable to corporation tax, whilst the share relating to individual partners is charged to income tax.
The national insurance costs of employing a spouse are usually greater than if they were a partner. It follows that partnerships may exist where a spouse becomes a partner simply to save a tax cost.
Where information is requested regarding a bankrupt who was a member of a partnership, HMRC can only provide information about the bankrupt individual. No information can be provided to the official receiver regarding solvent partners without the written consent of that solvent partner.