Wives as sleeping partners

Wives as sleeping partners

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It must by now be well known (well, by anyone who attends Tim Goode's seminars) that a wife who is not active in the business (et al) and thus a 'sleeping' partner is exempt Class 4 NIC (still fresh news to PTP Tax Return software it would appear!!).

So my question is: If the partnership makes a trading loss, and this loss is shared (say, 50/50) with the 'sleeping' partner, and if aforementioned partner has a separate source of earned income from n entirely separate employer (in this case she is a HMRC officer), can that spouse (on completion of a SA100 + partnership return, obviously) offset that loss against ' Sched E income?).

usually, yes of course. But would the 'sleeping partner' bit impact/modify in any way?

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By nick farrow
16th Jun 2010 11:17

sleeping partner & class 4 nic

I think you have to be careful with the sleeping partner status for class 4 nic exemption - when I claimed and failed on this (inspired by a lecture) the point boiled down to:

had the wife (in this case) contributed significant capital (in this case arguably not) and had the partnership agreement been amended to reflect the change in status from active to inactive?

without these points being fully resolved there was a danger that the settlements legislation could still bite

http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM4215.htm example 10

 

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By AnnaKournikovasKnickers
16th Jun 2010 11:43

Non Econ Active Spuse as 'sleeping' partner

The Class 4 thingy has been challenged on many of my cases, and they always back down. I wiill happily give you the narrative for the 'white space' if you email me here in LA.

 

no, that's not a problem, I predicated my question on the HMRC accepting the 'sleeping status. My question was concerned with the fact that I have not (yet) been challenged where a 'Sche D' trading loss has been offset that's all

 

Love  Anna ([email protected])

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By nick farrow
16th Jun 2010 15:21

thanks Anna

if you're not caught by the sideways loss anti-avoidance rules then I would have thought you were of - but I can't remember the detail but I seem to remember 10 hours a week and a capital contribution of £25k seems to be important

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