Can partners invoice their own partnership?

Can individual partners invoice their own partnership for example for management services?

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I have a client partnership engaged in performing arts and the partnership derives its income from performance fees.  The partners want to invoice the partnership for services they provide as individuals for any non-performing work, such as dealing with bookings, set design and construction, payroll, other administrative functions.  They each want to return the income derived from these functions as a separate self employed activity.

I cannot find relevant HMRC guidance on this, nor the appropriate chapter and verse.  My gut feeling is that what the client wants is not acceptable but I can't offer them exact reasons why.  Can anyone help?

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By petersaxton
20th Jan 2017 01:57

Are they self employed doing similar work already?

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Replying to petersaxton:
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By lawco
20th Jan 2017 08:53

They have returned self employed income in the past including it would seem, some fees they charged the partnership for performing. This would have been in addition to and separate from their partnership profit shares. I have suggested dealing with this by reflecting their specific efforts in their partnership profit shares but I am being questioned as to why I am counselling against doing what they've done in the past without query from HMRC. The tax take for the public purse is probably the same but it's a case of doing it right.

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By johngroganjga
20th Jan 2017 05:22

Whether it's "acceptable" or not tell them it makes no sense as it will pointlessly increase their admin time and costs. Tell them just to deal with any inequality in their non-performing work through the profit sharing, like everyone else. The result is exactly the same.

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By Paul D Utherone
20th Jan 2017 08:56

Agree prior shares of profit for the relevant elements. Split the rest. The only problem for tax purposes is if that leaves any one of them with a tax adjusted loss and the others with taxable profits, as you can't have that.

How would they intend charging the expenses that they incur on their non performing roles? They cannot claim personal expenses on partnership business separately through their personal returns, so will need to produce personal claims that can be incorporated into the partnership return and tax computation, allocated as negative prior shares & subject to the proviso above re not creating a loss for one and profits for the others

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By lawco
20th Jan 2017 09:49

Thanks. Damned messy isn't it! I believe ideally that they want to return the work they've invoiced to the partnership and related expenses as separate self employed activity but in the end, they will do what I agree to do. It's just that when I tell them what is going to happen, I want to offer solid reasoning, not just a gut feeling. If they don't go the self-employed route, provided there is no breach of regs., they will be putting their invoices and expenses into the partnership and muggins here will be preparing a calculation to reflect an end result in line with their requirement. Reverse engineering!

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