My sole trader, general builder client has recently done up and sold a property which was purchased in joint names with his wife.
I've determined that this property development should be treated as a trade rather than capital gain. However, as this was a joint project with his wife, could/should I treat it as a separate new partnership trade or as part of his continuing sole trader business, with 50% allocated to his wife?
The couple are currently renovating a second property.
Many thanks for your guidance.
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Replies (3)
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What evidence do you have one way or the other?
How separately has the property development venture been carried out?
Was the property development partnership registered with HMRC?
I'm not sure what you mean by evidence.
He has kept separate records of all the materials and other expenses relating to the property development. But from his point of view - some weeks he'd work on this project and some weeks he'd work on his client's projects.
No partnership has been registered (not that this would affect how it is treated)
I'm not sure what you mean by evidence.
Anything that points to the property development being either separately run from the building contracting - or not.
Is there a separate bank account for the partnership? Is there a partnership agreement? Is the contracting business charging the partnership for labour and materials? Does the partnership have a separate account at the builders' merchant?
No partnership has been registered (not that this would affect how it is treated)
It may not affect how the partnership is treated but HMRC appear to believe that it's a legal obligation to register a new partnership and having done so would add some credibility to the argument for the existence of a partnership ab initio.