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Partners annuity - practicalities

Partners annuity - practicalities

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As annuities paid by current partners to retired partners are not subject to PAYE, I wondered how the practicalities work.

I'm thinking that the partner gets basic rate tax deducted from the payments and this goes on a R185 form at the end of the tax year.  A copy of the R185 goes to HMRC with a covering letter and a cheque for the tax.

For the current partners, the annuity is added back for tax purposes and shown separatly as 'Partnership trade charges'.  When this flows through to their personal Tax Returns, they get higher rate relief on page AI2.

Can anyone confirm that I am going along the right lines?

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By Marion Hayes
29th Jun 2011 22:06

Long time ago but....

if I remember rightly the net payment is made by the equity partners. If it goes through P&L it is added back.

R185 sounds right for the certification of tax paid by annuitant.

However, there is no tax to be paid to HMRC. Partners claim on their personal returns in the same way as for pension contributions - and get higher rate relief on the payments. By retaining the tax deducted they get the basic rate relief they are entitled too as well.

-- Marion

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