Need for partnership Tax Return ?

Need for partnership Tax Return ?

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Could somebody please advise whether a partnership tax return is required when the following situation occurs:

My client has been a sole trader for many years with a June year end. On 1 December 2006 he took on a partner. The trade remained the same and the new partnership has no other income apart from the trading profits.

As I understand the situation, no partnership tax return is required to be filed for 2006/7 but the partnership (short) pages of the new partner's self assessment tax return do need to be completed with her share of the partnership income for the period 1/12/06 to 5/4/07.

Is this correct ?
John Miller

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By User deleted
31st Jan 2008 22:59

No partnership return needed
You are correct, no partnership return is needed for 06/07. The new partner will report as you describe.

The partnership will need a 07/08 return, which will report accounts for the year to 30 june 2007.

In Paul's comment below he refers to accounts to 31 December and basis periods to 31 December. I assume he misread your question, as you state that the usual year end has been June. The accounts will therefore continue to be to 30 June each year.

I believe that the basis periods for the new partner are therefore -
06/07 from 1/12/06 to 5/4/07
07/08 from 1/12/06 to 30/11/07 (as to 30/06/07 would be a basis period under 12mths)
08/09 from 1/7/07 to 30/6/08
Therefore make sure you remember to note all the overlap profits carried forwards.

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By User deleted
31st Jan 2008 17:02

I agree with Paul.
Next time I will read the question. Sorry!

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By Paul Soper
31st Jan 2008 15:44

No - well that is yes- no partnership return that is.
Partnership changes do not cause a cessation or commencement for the partnership unless as a result of the change it's trade is no longer the same - and that is pretty extreme.

So the partnership comes into existence on 1 January 2007 and the first partnership return will be the normal period to 31 December 2007, 07/08 return with a partnership statement showing the division between the partners.

The new partner has a new partnership source in 2006/07 and that should be shown as part of the 2006/07 return on the appropriate supplementary pages (hopefully notified within 3 months of commencing or there will be a class 2 NIC penalty) with the information estimated and the return indicated as provisional. That means it will be flagged for investigation unless the revised figures, in accordance with the partnership return and statement are available before 30 January 2009. Explain fully in the white box sections what has happened.

The basis of assessment is 1 January 2007 to 5 April 2007. Next year's personal return will be the year to 31 December 2007 and 3 months 5 days overlap relief will arise - don't forget it!

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By User deleted
30th Jan 2008 18:50

I would file a partnership return for 06/07
It would seem to have an obligation to self assess too.

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