Limited company owned by a partnership

Limited company owned by a partnership

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I have completed individual tax returns for 3 directors of a company showing the remuneration and dividend received. However, it has just come to light that the company is owned by the former partnership. Does anyone know how I should deal with this please? Should I not be showing the income and dividends on the individuals tax returns? How should the partnership tax return be completed. I would really appreciate any thoughts on this.
Melanie Curtis

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By Paul Soper
23rd Jan 2006 15:24

In Scotland?
In England and Wales a partnership is not a separate legal entity except where the law may define it as such (eg making a partnership tax return and statement) - so the shares can't really be said to be owned by the former partnership, they are owned by the persons who were partners as owners "in common" - think of land owned by a husband and wife which may be owned as tenants in common or joint tenancy.

As such there is really a bare trust with each of the relevant former partners being absolutely entitled, as to both income and capital, against each of them in their capacity as trustee. So like any bare trust each returns their own share as you seem to have done BUT...

The caveat here is that if the revenue considered the partnership still to be carrying on a business, which seems on the bald facts given very unlikely,then they could issue a notice requiring a partnership return to be made, that would then include a partnership statement and then they would be obliged to return the property as partnership income.

If in doubt about the last point you could always bring the revenue's attention to the situation but I am fairly sure that they would confirm the treatment outlined above.

Any other thoughts?

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