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Can a partnership issue bills to the partners?

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I have a husband and wife building partnership, who would like to enter into a building contract with the partnership to build their own new build house. They would be using this as any other job, billing for time of the partner and staff, together with materials at zero rate, is this possible?

My initial thought is that they can’t, however I haven’t come across a situation before where the client is willing to pay the income tax on his own labour to build his own house! 

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By frankfx
21st Feb 2019 21:53

You need to ask the clients ''why'' they want to self build using the approach you have outlined.

I think you will soon identify a knowledge gap or misapprehension.

I think they want to obtain trade discounts and the skills of their work force to ensure a well executed job.

National insurance on staff costs is another tax !

also possibly 9% class 4, and even 9% student loan tax .

That alone could pay for a pair of gold plated taps at chez nous.

They have then applied a quantum leap , which ends up with you raising a query on this forum.

Back to the drawing board and get the full picture is your first step.

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21st Feb 2019 22:22

From my conversation with him, it was to keep the staff in work rather than making them redundant., they will shortly come off another spec build with no immediate work besides his own house. If he ceased the partnership and took the staff on himself through PAYE to build the house, he would still have to pay the NI so no real difference there, the vat cash flow is better if it’s through the trading partnership as if he could bill himself at zero rate rather than having to submit a self build vat claim.

The main difference that I can see is the margin on the staff wages and his own time being subject to income tax.

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By frankfx
21st Feb 2019 22:52

Quick thoughts.

client out sources the contract.

the workers form ….outsource limited

Cash flow inside outsource limited , would be good .

no monthly PAYE due .

in reality it is client who enjoys the cash flow gain

C Tax 9 months after year end...…….. say contract takes up 12 months!!

Workers take life style /'' salary'' as dividend..... equates to Self employed tax and 9 %NIC …… well not far off.

Client holds a major retention on the work invoiced ( effectively the Ctax is the retention ) released when outsource limited CT is due .

effectively the CTax would have been the PAYE, payable monthly, without the 12% and 13.8 % NIC.

as always how much is involved ££££.?

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22nd Feb 2019 07:10

Stats696 wrote:

They would be using this as any other job, billing for time of the partner ...... 

So turning the partner's personal efforts on work on his/her own house into taxable income?
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to Wanderer
22nd Feb 2019 07:41

Yes, I appreciate thar there may be other options but I was wondering if it could be done as it stands

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22nd Feb 2019 09:57

Does the client have the money to support the work when it appears that the partnership has no work & therefore the income has declined ?

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to bernard michael
22nd Feb 2019 12:18

Yes he does

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