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Clarification of declaration of Partnership Income

Extremly confused about declaring partnership income on personal tax return

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I have been talking tothe officer at HMRC as my accountants have bene useless. I beleive the sitaution is as below, but can someone confirm please?

According to the partnership filing I received the following distributions (made up numbers). The partnership has a tax year finishing 31/12

2017       £100,000 (received Nov17)

2018       £40,000

2019       £100,000  (not filed, but will be)

I am told by the officer at HMRC the correct way to report this is on my personal tax return is

2016/17                Zero (as first payment received after end of tax year)

2017/18                £100,000 actually declared plus 25% of the 2018 receipt i.e. £10,000 so total £110,000

2018/19                The full amount of 2018 partnership statement i.e. £40,000

2019/20                The full amount of 2019 partnership statement i.e. £100,000

This means I pay double tax on that first £10k, but apparently there is some offset when the partnership closes.

So firstly the 25% allocation to the preceeding year ONLY happens in year 1?

Secondly even thoguh the partnership tax year is misaligned with personal tax year you declare all the Year 1234 in the tax year 1234-1235?

What's the rule about getting the double tax paid back at theend of the partnership? HMRC mentioned something about this expires after some time.

Appreicate any clarification

Mike

Replies (13)

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By penelope pitstop
01st Nov 2019 13:26

Useless accountants are as rare as "hen's teeth".

Useless HMRC employees are quite common!

As regards the tax year 1234/1235, you may have to consult Robin Hood, Friar Tuck or Little John about this. Fraid I wasn't alive in that tax year!

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By Tax Dragon
01st Nov 2019 13:29

I won't be the last to suggest you need a new accountant.

What you have been told is, what's the French? Oh yes, b*llocks.

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Replying to Tax Dragon:
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By masplin
01st Nov 2019 13:35

So you are saying what HMRC told me is wrong? If so whats the right answer?

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Replying to masplin:
paddle steamer
By DJKL
01st Nov 2019 13:39

Key information:

When did you join the partnership as a partner, on what date?

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Replying to DJKL:
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By masplin
01st Nov 2019 13:47

31/7/17

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Replying to masplin:
paddle steamer
By DJKL
01st Nov 2019 14:02

So, you were not a partner in 2016/2017 so have no liability for that year, HMRC are correct but not because there was no distribution but because you were not a partner.

For 2017/2018 (from 1/7/17) you have roughly the 6 months which is the £100k plus 3 months of accounts 31.12.18 which is £10k, so £110k

For 2018/2019 you have the 12 months to 31.12.18 which is the £40k

for 2019/2020 you have the 12 months to 31.12.19 which is the £100k

As you note, you have a £10k overlap (profits used twice)

You carry this forward and it may as you indicated get used on your ceasing to be a partner.

Your problem with your question is you initially did not make it clear when you became a partner

Edit- I would still have an accountant fill in the pship self assessment page each year as apart from actual numbers on return you will also need to fill in various boxes with dates.

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Replying to DJKL:
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By masplin
01st Nov 2019 14:03

That's perfect thank you. As far as the £10k that's been double taxed HMRC said something about you could use this on cessation, but only by some expiry date which I didn't catch?

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Replying to masplin:
paddle steamer
By DJKL
01st Nov 2019 14:15

I am not aware of a time limit to use but maybe one has been introduced and I
have missed it. (certainly not impossible)

Two other points, you can possibly force its use by a change of accounts year end, say a 15 month period to 31.3.20 rather than 31.12.19 (though might not suit other partners) and also odd trades , like farming, authors have averaging rules that might help smooth out fluctuations in the profits which are quite marked.

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paddle steamer
By DJKL
01st Nov 2019 13:33

What has received got to do with anything , what you receive by way of payment out of the partnership has little bearing on what you are taxed on as your share of partnership profits? Partnership computes its total profit for an accounts year in the accounts/partnership return and this is allocated amongst the partners.

Partners then have these figures within their individual partnership supplements of their personal returns and recognise for tax as appropriate re rules surrounding the basis of assessment.

Ignoring years that require joining /leaving adjustment,s partnership share of profits to say partnership year end 31.12.17 will be assessed in 2017/2018, 31.12.18 in 2018/2019, 31.12.19 in 2019/2020.

An accountant IS required, this is not an area people tend to be able to muddle through.

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Replying to DJKL:
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By masplin
01st Nov 2019 13:37

Sorry bad terminolgy. i received what the partnership declared as my profit share.

So you are confirming what HMRC said was correct for the middle years i.e. there is no adjustments. Why are others saying its b*****s?

Can you clarify what the adjustment is at the end of the partnership please?

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Replying to masplin:
paddle steamer
By DJKL
01st Nov 2019 13:49

What date you joined the partnership in accounts year ending 31.12.17, if you did join the partnership in that year, is the key to computing what falls in each year for SA purposes.

https://www.gov.uk/government/publications/how-to-calculate-your-taxable...

Example 6 may help clarify, article also covers overlap profits.

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By Tax Dragon
01st Nov 2019 14:04

Quite apart from the "bad terminology", I suspect you have (given) the wrong information.

Eg £100,000 for y/e 31 Dec 2017 received Nov 2017 doesn't make sense.

The partnership will have an accountant. No harm in moving your own affairs over to that firm.

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By JDBENJAMIN
04th Nov 2019 14:13

If your accountant is genuinely useless, then hire one who is not, and let him deal with it. Don't try and do it yourself.

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