I'm very sorry if this is a stupid question.
My client has been a sole trader since 1998. As his profits increased, his wife (previously an employee of the business) became a partner. This is the scenario:
The business accounting period is 1st August - 31 July.
Wife became a partner on 2 June 2005 (much later than planned, but they were hindered by having to register as a partnership with VOSA).
I would like to allocate the wife as much profit as possible to minimise 40% tax exposure to the husband. I presume I can only allocate her 100% of the 59 days she was a partner during the accounting year?
Also, does she have to pay tax on the proportion of profit on the accounting period to 31.07.06. (ie 01.08.05. - 05.04.06.), thus creating an overlap?
The husband already has an overlap. Would it be a good idea to change the year end date?
I'm sorry to ask such a stupid question, but a simple sole trader job turned into something a little more involved for me.
Thanks for any help - no flamers please :)
Frances Hall