New partner joining - basis period and tax? Help.

New partner joins to form a partnership - what should their basis period be and tax reported?

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Hello everyone - a problem with basis period when a wife joins her husband in a trade to form a partnership. Any help would be appreciated.

A husband is trading as a sole trader with year end 5th of May each year! ( I know a silly year end).

His wife joined on 1/1/17 to create a partnership.

For 2016/17 her basis period I assume is from 1 January to 5 April 2017 - so she gets her share (50:50 percentage with her husband when she joins) of the profit for the accounting period for the year ended 5/5/17 - but only the days from 1 January to 5 April are included? (95 days over 125days).

For 2017/18  - what happens?  Does she report profits on her tax return for her first 12 months in the partnership? So, on this tax return she reports firstly her share of profits in the year ended 5/5/17 .......  AND also her percentage of the profits up to 31 December 2017? So to get these we take we take the accounting period ending 5/5/18 and then include her share of the days to 31/12/17, 240 days over 365 days.?  Is this correct?

I am assuming that in the 2018/19 tax return she reports profits for her share of the profits for the whole of the period ended 5/5/18?

Another complication is that the husband passed away on 10/9/17.

 

Any help would be greately appreciated.  I've looked at the whole scenario and cannot for the life of me figure out how the figures that appear on her tax returns are pulled through on IRIS.   - is it because I changed his Sole Trader status to Partnership? 

Any help would be great.

Thank you so much.

Owen

Replies (2)

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Scooby
By gainsborough
13th Feb 2019 17:08

I agree with your basis periods for all the tax years Owen.

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RLI
By lionofludesch
13th Feb 2019 17:42

Drawing a timeline makes this stuff easy.

2016/17 1 Jan 2017 - 5 Apr 2017

2017/18 1 Jan 2017 to 31 Dec 2017

2018/19 Year to 5 May 2018

Overlap periods 1 Jan 2017 to 5 Apr 2017, 6 May 2017 to 31 Dec 2017.

I would always, always, always, advocate matching accounting dates with changes of personnel.

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