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Partnership or 2 x Self Employment?

Is a short-term project by two people a partnership or two self employment income streams?

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If someone runs a short-term project with another individual that has an income stream of more than £2000 is this income reported to HMRC individually as two self-employed income streams of more than £1000 or as a partnership with an income of more than £2000?

I ask this question as part of my investigation of the practical implications of MTD.

Replies (7)

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By D V Fields
18th Jan 2022 08:34

A partnership to define amongst other the relationship and share of profits and also needs to be registered as such with HMRC to obtain a UTR. Then self assessment for the individuals if HMRC issue a notice to complete one or a requirement to advise HMRC of any untaxed income if a notice isn’t received.

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VAT
By Jason Croke
18th Jan 2022 08:51

MTD is a VAT thing (for now), so presumably your question is about VAT/MTD. When two individuals come together to work on a joint venture, for VAT purposes only, it is seen as a partnership. Thus sales are made by the "partnership" and any profit is shared between the partners.

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Replying to Jason Croke:
RLI
By lionofludesch
18th Jan 2022 09:54

Jason Croke wrote:

MTD is a VAT thing (for now), so presumably your question is about VAT/MTD. When two individuals come together to work on a joint venture, for VAT purposes only, it is seen as a partnership. Thus sales are made by the "partnership" and any profit is shared between the partners.

I read it as the OP was considering the future IT issues.

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By adjadj
18th Jan 2022 13:06

Thank you to the three respondents so far. I am investigating MTD ITSA, apoologies for not stating this at the outset

This specific inquiry relates to dealing with shared income. With shared income one invoice or receipt contributes to the data for two more more taxpayers. For those using Excel and bridging software this appears to be doable in a consistent and error free manner. It will be interesting to see how the software package providers deal with it.

Share income will affect a large number of people reporting MTD. I have established via an FOI inquiry that more than a million people report property income on a shared basis.

My question today was to establish whether this issue might also extend into self employment income where a couple of people work together on something.

Based on the two replies above it would appear that this would be considered a partnership something HMRC is postponing until 2025 (at least!) for MTD.

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Replying to adjadj:
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By Hugo Fair
18th Jan 2022 14:40

It's not really for me to clarify on behalf of other members, but ...

* Jason said "When two individuals come together to work on a joint venture, for VAT purposes only, it is seen as a partnership." NOTE: the "for VAT purposes only" clause!

* Similarly, nothing that DV Fields said equates to your "this would be considered a partnership .. for MTD."

Personally, I can't conceive of a scenario where two people who are truly (and by definition independently) self-employed would agree to receive a single payment (presumably against a single invoice?) that then needs to be allocated to the individuals. Who owns the account receiving the payment? What agreement is there between the two parties? And so on.

I fear you are constructing a straw man for some unexplained position.

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Replying to adjadj:
By ireallyshouldknowthisbut
18th Jan 2022 15:50

I don't think its terribly common for traders to have temporary partnerships treated as sole trades.

Moreover what would normally happen if a single bill is issued is this would be in the name of one party, and the second party just bills the first for their cut. That happens all the time, but there are two invoices.

As far as MTD goes its the least of worries. The main issue is low volume transactions business being caught up who currently can happily do their whole annual bookkeeping in about 1-2 hours flat.

Tax equivalent of being forced to drive to the corner shop 5 minutes away, when you cant drive, don't own a car and quite frankly don't want to.

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By adjadj
18th Jan 2022 16:48

The OP (me) is a business analyst investigating MTD for ITSA

I wanted to see whether joint income was just an attribute of land and property income or could also affect sole traders.

The replies show that it will not impact sole traders.

Thank you all for your help

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