I have been asked to act for a new partnership. They registered the partnership with HMRC in July 2019 with a commencement date in 2018/19 then buried their head in the sand. 3 of the 5 partners already have UTRs and one of the others has applied for one but to date this has not come through. The 5th partner is unlikely to get his act together before the filing deadline (i.e. not complete a SA401) and accepts he will not be treated as a partner for 2018/19 (I don't act for him personally, only the partnership and one of the other partners and only since last week!).
The accounts have been prepared and there are losses and as these have been calculated on a cash basis the losses can only be carried forward against future profits, which are likely as it's an up and coming band and they have already secured an advance.
Obviously it's not possible to submit the Partneship Return if there is no UTR for one of the partners but was thinking of submitting the return with 3 partners where the UTRs are known, then submitting an amended return as soon as the 4th partner's UTR comes through, assuming we don't have this before the filing deadline. The 5th partner can then be admitted as a partner with effect from 2019/20.
As the losses are not being claimed against other income is HMRC likely to take issue with this? The band really does want to get things straight and having woken up to the fact they need to do something are being really pro-active.
Has anyone had this issue before and other than my suggestion, how did they get round it?
Thanks
Replies (9)
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Isn't it bog standard TAX advice to start businesses that are likely to be loss making in the early years in unincorporated form so that loss relief can be claimed? But I see that HMRC might contend that this is a hobby.
"The 5th partner is unlikely to get his act together before the filing deadline (i.e. not complete a SA401) and accepts he will not be treated as a partner for 2018/19" You can't change the facts after the event either he was or he wasn't a partner.
You must include all five partners - you can't prepare and submit a return that is deliberately wrong. Use dummy UTRs, eg ten 9s or the partnership's UTR.
"the losses can only be carried forward against future profits". Fine if this is an acknowledgement that the trade is not conducted on a commercial basis and other criteria aren't met, but otherwise its up to each partner what to do with his share of the loss.
You seem to have misunderstood the point about choosing to include partners - it is not optional and you cannot do so. The partnership was setup with 5 partners (that is a fact clearly stated in your OP) and so the return MUST include all 5 partners. The fact that one does not have a UTR means that the return almost certainly WILL be late, each partner WILL have a £100 fine and any attempt by you to circumvent that by omitting a partner is incorrect, unethical and potentially fraudulent. If you cannot obtain a UTR by 31 Jan (it could well still be possible) your only option is to submit online using the partnership UTR for the missing partner and amend ASAP. Tell the partner who does not wish to get his act together that each of them faces a £100 fine if he doesn't get it sorted.
You seem to have misunderstood the point about choosing to include partners - it is not optional and you cannot do so. The partnership was setup with 5 partners (that is a fact clearly stated in your OP) and so the return MUST include all 5 partners. The fact that one does not have a UTR means that the return almost certainly WILL be late, each partner WILL have a £100 fine and any attempt by you to circumvent that by omitting a partner is incorrect, unethical and potentially fraudulent. If you cannot obtain a UTR by 31 Jan (it could well still be possible) your only option is to submit online using the partnership UTR for the missing partner and amend ASAP. Tell the partner who does not wish to get his act together that each of them faces a £100 fine if he doesn't get it sorted.
I assume you've told the other 4 they may be fined if no 5 doesn't co-operate. That may have more effect
I've just encountered the exact same situation. Partnership formed before they were clients and one partner with no UTR. Did using the partnership UTR for the individual work in getting the partnership Return submitted?