Husband runs a successful publishing business as a sole trader, and has now become a higher rate tax payer.
I am preparing his tax retun for the 5 April 2012 year, and was wondering if I can retrospectively make his wife a partner, and use her basic rate band, so neithr of them are higher rate tax payers.
Is this OK to turn a sole trader into a partnerhsip at a later date, or am I doing something wrong?
Many thanks
Sarah
Replies (3)
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Unless you have a time machine like Dr Who you cannot change the past.
If you were to submit information to HMRC which falsely described the past you would be engaging in criminal tax evasion.
David
Partnerships need thought by the partners
A partnership has very real implications for the wife/ new partner.
Partners are,apart from taxation, jointly liable for any debts so by forming a partnership any personal assets of the new participant are at risk if anything goes wrong in the future.
There also needs to be a partnership deed, bank accounts, notifications to customers of the change in status etc etc at the beginning.
If the liability is likely to carry on increasing it is worth considering for the future. If his wife actually works in the business he coiuld consider paying a wage which could have the same effect without creating the higher leel of personal risk
Incorporation
Incorporating the business into a limited company may also be worth exploring.
David