General Partnership for family of freelancers

Didn't find your answer?

Hi,

I need advice on the following situation. My husband is self-employed in the IT field and has a Consulting Agreement with a USA-based company. I am currently not officially employed, but I help my husband with management and also write tests and some pieces of code at his request. Would it be appropriate for us to establish a general partnership in this situation? We want to do this for tax purposes and also so that I can accumulate qualifying years for National Insurance. Wouldn’t this be considered tax evasion?

If we establish a partnership, will he need to renegotiate the contract with the company? Is it mandatory from HMRC's point of view for my husband to sign the contract on behalf of the partnership, or can he sign it in his own name? If I have my own contract in the future, must I sign it on behalf of the partnership, or can I sign it in my own name without explicitly mentioning the partnership if I want the income to be considered partnership income? Is there a law regulating the rules for signing contracts with third parties for partners in a general partnership? I am asking because in some cases a client may be more willing to sign a contract with one name rather than on behalf of a partnership when it comes to freelance work.

Will it be enough to register General Partnership with HMRC, sign a Partnership Agreement between us, and include the income in the partnership's Self Assessment to prove the existence of a partnership and keep HMRC happy?

Replies (17)

Please login or register to join the discussion.

avatar
By David Ex
31st May 2024 19:20

You need an accountant.

https://find.icaew.com/

Other professional bodies are available.

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

Sounds like you also need a legal adviser.

Thanks (1)
avatar
By FactChecker
31st May 2024 19:23

7 x question-marks is a fairly clear indication (if not already obvious to you) that there are a LOT of interwoven options that you're considering ... which not only could have intrinsically different impacts (and not just on tax), but can inter-act in ways that you probably haven't considered.
So it's time to take some professional advice ... bearing in mind that it's important to do so *before* starting down any of the paths you've mentioned (as they can be hard and/or expensive to reverse out of after the event).

Try to focus on a clear picture of what you want to achieve - rather than whether or not a particular option (as in partnership rather than employment) is 'suitable'.

Thanks (4)
Replying to FactChecker:
constructor
By znzbn
03rd Jun 2024 11:17

Thank you! I apologize if the number of question marks confused you. Essentially, I have only one question. Must a partner sign a contract "on behalf of the partnership" to bind the other partners, or is a signature without mentioning the partnership enough to bind them?

Thanks (0)
Replying to znzbn:
paddle steamer
By DJKL
03rd Jun 2024 11:28

Up here with most significant property contracts each partner signs as an individual them one of them signs as "The DDDD Partnership". No idea what they do Down South where partnerships do not have quite the same legal capacity as they do up here.(ours are a legal person)

Have you considered an LLP?

Thanks (0)
Replying to znzbn:
avatar
By FactChecker
03rd Jun 2024 14:02

FWIW the number of question marks doesn't confuse me ... but as I said they indicate you are in a fluid state where multiple inter-acting options may be open to you right now - and that getting clarity on these before implementing anything is always a better bet than trying to untangle it later.
Hence my suggestions to focus on what you want to get out of it (short and longer term) and then obtain professional advice on putting a 'solution' into practice.

It's not clear why your "only one question" has now usurped all the other ones (which suggests you're still making up your mind before considering all the options) ... but the no doubt unhelpful answer is that it depends on the type of Partnership (and its Agreement).

Thanks (2)
avatar
By Paul Crowley
31st May 2024 20:27

If Husband had an accountant then this would already have been considered when he started.
Not once have you mentioned being paid wages, which is faster and more efficient if the wage fits the work you do. It also means that you do not become jointly and severally liable to any liabilities of the partnership.
If Husband has an accountant then either he has rejected these ideas in the past, or the accountant is useless.
Talk to your husband and then jointly have a meeting with an accountant, and expect the meeting to be at least 2 hours long.
There are other ways to trade, and the accountant should go through all of the options.

Thanks (3)
Replying to Paul Crowley:
avatar
By Tax Dragon
31st May 2024 22:46

Paul Crowley wrote:

If Husband has an accountant then either he has rejected these ideas in the past, or the accountant is useless.

There is a third possibility. Remember the golf course thread? It's not always rewarding to talk to one spouse about the other.

Thanks (1)
avatar
By johnthegood
01st Jun 2024 10:00

As a VERY general answer to your question, yes a partnership is an option.

I have seen some on here that don't like partnerships, I do like them for H&W, more flexible than a company, or H paying W a wage is the main reason.

But do take advice it might not be the best option for you.

Thanks (1)
DougScott
By Dougscott
01st Jun 2024 13:41

You and your husband need to seek professional advice and explain the situation fully to a suitably qualified accountant. There are various options that may or may not make sense for your particular circumstances including partnership, limited company, direct employment by your husband, direct employment by your husband's limited company. What works best will depend on all sorts of factors such as IR35, pension plans, etc.

Thanks (0)
avatar
By Matrix
01st Jun 2024 15:43

On the specific question you asked, no, I would not treat consultancy fees earned by your husband as partnership income just because you prefer the tax treatment.

Thanks (0)
Replying to Matrix:
avatar
By johnthegood
02nd Jun 2024 07:39

Matrix wrote:

On the specific question you asked, no, I would not treat consultancy fees earned by your husband as partnership income just because you prefer the tax treatment.

Why not? seems like an excellent tax planning idea to me

Thanks (0)
Replying to johnthegood:
avatar
By Matrix
02nd Jun 2024 08:17

Yes but you can’t just do what is suggested in the last paragraph.

Thanks (0)
Replying to Matrix:
avatar
By johnthegood
02nd Jun 2024 09:13

Matrix wrote:

Yes but you can’t just do what is suggested in the last paragraph.

Correct, but you said you would not suggest a partnership just to save tax - I would!

Obviously there are other considerations but I like partnerships, which as I have said are better than other options in many situations.

Thanks (0)
Replying to johnthegood:
avatar
By Matrix
02nd Jun 2024 11:44

I would not put self-employment income on the partnership pages. Sorry for not being clearer.

I think the OP wants to know what to do to enable them to achieve the outcome you suggest.

Thanks (0)
Replying to Matrix:
constructor
By znzbn
03rd Jun 2024 11:32

Thank you! The tax treatment for a partnership is indeed an important reason why we want to officially form a partnership. Nevertheless, it seems to me that a situation where freelancers work together on tasks, help each other, and share income fits quite well under the vague concept of a partnership from the 1890 Act. Am I correct in understanding that the main reason you do not recommend including self-employment income in the partnership tax return is that the agreement is made without mentioning a partnership? The main question I am trying to find an answer to is: is it mandatory to sign a contract mentioning the partnership? Or is it enough that there are other signs of a partnership?

I’ve received some suggestions that I become an employee of my husband, but this seems much more dubious and not corresponding to reality.

Thanks (0)
Replying to znzbn:
avatar
By Justin Bryant
03rd Jun 2024 12:03

The existence of a general partnership is a question of substance over form, as confirmed by para 208 here:

https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11673/TC...

Paras 34 et seq and paras 302 et seq of the case below also show there should be no difficulty here re the existence of the (oral/undocumented) general partnership under English contract law prior to its formal documentation:

https://www.bailii.org/ew/cases/EWHC/Ch/2020/1916.html

Thanks (1)
Replying to znzbn:
avatar
By Paul Crowley
03rd Jun 2024 13:13

If you are in fact working for your husband then he can pay you wages.
The opening post suggests that he is your only 'client'
Being self-employed to your husband probably comes with more risk than being his employee.
Becoming a partner suggests that more profit will be allocated to you than would be commercial for the work you do, so it is a tax minimisation scheme.
Wages come with many benefits.

Your postings do seem to be circular. Currently, is H the only person with a contact and a client?

Thanks (0)