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Partnership Return first year

To complete Partnership Return for first year?

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Do I need to complete an SA800 Partnership Return?

Partnership started trading from 1 Aug 2018 with year ended 31 July 2019. Husband had been trading as sole-trader with same year-end therefore his profits will be wholly assessed on his 2019/20 Tax Return. As for wife she'll be assessed on her share of the profits from 1 Aug 2018 - 5 Apr 2019 (8 months) firstly on her 2018/19 Tax Return and then again (creating overlaps) on her Tax Return 2019/20 (albeit for the full 12 months).

In order for me to declare her first 8 months Partnership profit share should I also be completing a Partnership Return for 2018/19? If so with just 8 months figures so as not to dupicate on 2019/20 SA800? And, any special boxes to ensure completed or ticked?

Thanks

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RLI
By lionofludesch
22nd Aug 2019 16:19

Yes.

The partnership was trading during the year so it needs to submit a return for that year.

Not sure what you mean by "not duplicating on 2019/20" - that's what overlaps are all about.

You can declare the SAI on either the 2018/19 return or the 2019/20 return. Or both! Depends how you decide to apportion the first year. Could be actual figures, could be time apportionment.

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Replying to lionofludesch:
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By clark.hall
22nd Aug 2019 16:24

Thanks for reply. We will time apportion profits (therefore 2018/19 is 248 / 365 days). I wasn't sure that overlaps were dealt with at all on the Partnership Return. I had considered only declaring the wife's first 248 days of profits on her personal 2018/19 Return and that alone.
Sorry, what's "SAI"?

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Replying to clark.hall:
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By Tax Dragon
22nd Aug 2019 16:41

You might also want to read https://www.accountingweb.co.uk/any-answers/warm-friday-afternoon-question, particularly the final post.

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Replying to Tax Dragon:
RLI
By lionofludesch
22nd Aug 2019 17:07

Tax Dragon wrote:

You might also want to read https://www.accountingweb.co.uk/any-answers/warm-friday-afternoon-question, particularly the final post.

I would probably not want to risk late filing penalties myself - min £200. It's a lot easier to fill in the form.

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Replying to lionofludesch:
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By Tax Dragon
22nd Aug 2019 17:43

Late filing? The other thread (particularly the final post) does not suggest not submitting a partnership return.

lionofludesch wrote:

It's a lot easier to fill in the form.

Agreed. The other thread (and, y'all be pleased to hear, not just particularly the final post) was about what to fill it in with.

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Replying to clark.hall:
RLI
By lionofludesch
22nd Aug 2019 17:00

clark.hall wrote:

Thanks for reply. We will time apportion profits (therefore 2018/19 is 248 / 365 days). I wasn't sure that overlaps were dealt with at all on the Partnership Return. I had considered only declaring the wife's first 248 days of profits on her personal 2018/19 Return and that alone.
Sorry, what's "SAI"?

Standard Accounts Information.

Overlaps aren't on the Partnership Return but there is a section on the Division of Profits which is important.

And you'll need to say what the profits for 2018/19 are at some point.

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Replying to lionofludesch:
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By Tax Dragon
22nd Aug 2019 18:31

lionofludesch wrote:

you'll need to say what the profits for 2018/19 are at some point.

Profits? Whose profits? I know about basis periods for partners (so too does the OP, that's clear); I'm less clear on those for partnerships (though I am always open to being educated).

The OP's idea (independent of the other thread, but consistent with it) of declaring the wife's (2018/19) profit on her tax return and the hubby's on his.... does that not meet your need?

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Replying to Tax Dragon:
RLI
By lionofludesch
22nd Aug 2019 18:45

Tax Dragon wrote:

The OP's idea (independent of the other thread, but consistent with it) of declaring the wife's (2018/19) profit on her tax return and the hubby's on his.... does that not meet your need?

If it does, it begs the question, why do we fill in SA800s at all ?

Surely we can just stick the profits on the partnership pages of the personal return.

Up to you and the OP - I've said what I think and why. I won't be changing my view in the foreseeable future.

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By clark.hall
22nd Aug 2019 18:59

So let’s say I go down the route of including 8 months figures on 2018/19 SA800. I’d include the husbands share on that and yet not on his personal ITR? And that doesn’t seem to cause questions from HMRC? Thanks for interesting discussion

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Replying to clark.hall:
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By Tax Dragon
22nd Aug 2019 19:42

Sorry for yet another double negative (I don't seem to be able to express myself without them today), but as I said in the other thread, I'm not sure I wouldn't do the same as Lion. And I wasn't disagreeing (there I go again!) with Lion's post. But I did think (phew!) that you should be made aware of an alternative point of view as expressed in the other thread.

And I will have to think about it properly and decide soon myself (probably revisiting these threads at the time), as I have a couple in the same situation as you.

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Replying to clark.hall:
RLI
By lionofludesch
22nd Aug 2019 22:43

clark.hall wrote:

So let’s say I go down the route of including 8 months figures on 2018/19 SA800. I’d include the husbands share on that and yet not on his personal ITR? And that doesn’t seem to cause questions from HMRC? Thanks for interesting discussion

No.

You confuse the allocation of profits in an accounting period with the basis periods for income tax.

In your scenario, the wife has an eight month and twelve month basis period based on the first twelve months accounts. The husband continues to have twelve month periods ended 31st July.

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Replying to lionofludesch:
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By Tax Dragon
22nd Aug 2019 23:20

lionofludesch wrote:

You confuse the allocation of profits in an accounting period with the basis periods for income tax.

I think this may be the key point (c.f. my "whose profits?" comment above), but I'm not sure who (apart from me) is confused.

The need to apportion profits is precisely because you need taxable amounts for basis periods. Basis periods is a partner-level concept... or at least you didn't correct me when I said that above. Partnerships don't have basis periods, they have accounts and results for accounts periods. The 2019 results will be shown in full in the 2019/20 partnership tax return. What imposes a need on the partnership to disclose extra figures that don't relate to accounts periods?

(I confess I'm still just thinking out loud, and I may end up agreeing with you when I do this for real with my clients rather than shadow-doing it with other people's, but I'm finding this logic quite compelling and could convince myself when I reread it later!)

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Replying to Tax Dragon:
RLI
By lionofludesch
23rd Aug 2019 07:47

Tax Dragon wrote:

lionofludesch wrote:

You confuse the allocation of profits in an accounting period with the basis periods for income tax.

I think this may be the key point (c.f. my "whose profits?" comment above), but I'm not sure who (apart from me) is confused.

The need to apportion profits is precisely because you need taxable amounts for basis periods. Basis periods is a partner-level concept... or at least you didn't correct me when I said that above. Partnerships don't have basis periods, they have accounts and results for accounts periods. The 2019 results will be shown in full in the 2019/20 partnership tax return. What imposes a need on the partnership to disclose extra figures that don't relate to accounts periods?

(I confess I'm still just thinking out loud, and I may end up agreeing with you when I do this for real with my clients rather than shadow-doing it with other people's, but I'm finding this logic quite compelling and could convince myself when I reread it later!)

The partnership return asks for the accounting and tax adjusted profits of the period and how those profits are divided.

The personal returns ask for the amounts taxable and any overlap relief claimed.

There's no inconsistency here. There's also no requirement for one to match the other; there are other situations, such as change of accounting date, where this will not be so.

The apparent anomaly arises because the client has chosen a year end other than 31 March/5 April. For this reason, I would strongly recommend such a year end for partnerships - especially if partnership changes are going to be frequent.

Try sorting out the entries for a partnership with a 31 Dec year end, five partners to start with. one leaves at the end of January, one at the end of April, two join on 1 June, another leaves on 31 July and two more start on 1 October. Different PSRs at every change, of course. If you're confused by a simple husband and wife partnership, you'll struggle - but it can be done.

Anyway ..... nearly time to set-off for Wembley.

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Replying to lionofludesch:
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By Tax Dragon
23rd Aug 2019 08:10

All those partners... but only one set of accounts and only one profit per those accounts. It's the commencement point that gives rise to the question, not PSR changes or comings and goings of partners.

Purely pragmatically, it would seem as if you've done it your way, others have done it another way and HMRC hasn't disputed either. So this could be all hot air... where's Nefertiti when you need her?

Have a great trip.

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Replying to Tax Dragon:
RLI
By lionofludesch
25th Aug 2019 19:07

Tax Dragon wrote:

Have a great trip.

Thank you, Dragon.

Yes, we had a lovely trip, won a cup, did a lap of honour around a Wembley Stadium with about 500 people rattling around in and, all in all, it was a fantastic experience. The last time we did it was in the old Wembley - a crumbling ruin which still retained a fair bit of atmosphere.

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Replying to lionofludesch:
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By Tax Dragon
25th Aug 2019 20:57

A happier trip for you than last year's, I'd imagine.

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Replying to Tax Dragon:
RLI
By lionofludesch
26th Aug 2019 11:40

No - we weren't there for the curtain raiser. We were there for the Grand Finale.

Sheffield Eagles beat Widnes Vikings 36-18, coming back from 0-12 down and maintaining their 100% Wembley record. You can still catch it on the iPlayer and you'll be rewarded by a couple of shots of Lion in his office during the game, sitting next to some bloke in a suit, barking into a walkie-talkie.

https://www.bbc.co.uk/iplayer/episode/p07l4qvh/rugby-league-2019-1895-cu...

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By clark.hall
23rd Aug 2019 09:42

I’m hoping to finalise the job this morning and I’m still not sure which way I’ll be going. With partnerships becoming more common I’ll look out for this question cropping up again

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By clark.hall
23rd Aug 2019 11:44

Having gone through the Partnership Tax Return Guide (SA850) I thought I'd share my thoughts if it helps anyone.

The guide is all over the place and can be understood almost anyhow you wish! I've literally highlighted and made notes "FOR/AGAINST" declaring a time-apportioned period or £NIL profits.

Anyway, the clincher for me was PTGR page 10, heading "Box 3.10 - Tick box 3.10 if the partnership has succeeded to a business previously carried on by a sole trader and that person has included the accounts information in their tax return (read the notes on Page PTRG 9 of this guide on ‘Changing between self-employment and partnership’). If you tick box 3.10 you do not need to fill in boxes 3.14 to 3.93 and boxes 3.99 to 3.115” (I.E. DO NOT NEED TO DECLARE PROFITS)

AND, Box 3.11 - Tick box 3.11 if the partnership’s accounts do not cover the period from the last accounting date or if no accounts end in 2018 to 2019. Explain why in box 3.116 ‘Additional information’, on page 3 of the Partnership Tax Return."

Leading me personally to the conclusion that because last year ended 31 July 2018 is declared on husband's (as sole-trader) Tax Return then we've no need to declare any profits on this first year's SA800.

I'd also point out PTGR page 8 “In some situations you may need to combine or divide the figures to fit the standard format It’s quite possible that there may be more than one acceptable way of doing so. Whichever method is adopted, be consistent from one year to the next. If you want to explain any figures in more detail make a note in box 3.116 ‘Additional information’, on page 3 of the Partnership Tax Return”. Make sure that you transfer all the entries from your accounts, and that you include them once only. – I.E. DO WHAT YOU WANT BUT DON'T CONFUSE US AND INCLUDE FIGURES TWICE.

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By unearned luck
26th Aug 2019 15:22

The correct and pedantic answer to the question posed "Do I need to complete an SA800 Partnership Return?" is only if HMRC have issued a notice to file a return that has not been withdrawn. If HMRC have issued such a notice then the considerations discussed in this thread apply.

Care should be taken over the quantum of any profit included in a partnership return because of HMRC's reaction to losing King & Others. In that case ten of the partners disagreed with a £1.4m add back in the tax comp and completed their personal returns declaring a share of the pre-add back loss while the partnership return showed a profit for each of them. For 2018/19 onwards s 12ABZB TMA 1970 provides that the size of the pie shown in the partnership return is conclusive but you can argue over the size of your slice of the pie. You would be unable to make any corrections to the Partnership return after the period allowed for doing so has expired so any repayment claim by the partners after then (that would otherwise be allowed) would founder on the rock of s 12ABZB.

Would someone please gainsay this reading of the effect of s 12ABZB?

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Replying to unearned luck:
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By Tax Dragon
27th Aug 2019 11:11

unearned luck wrote:

Would someone please gainsay this reading of the effect of s 12ABZB?

This is a separate issue/discussion and should be in a separate thread.

However, briefly, I don't see that s12ABZB changes either the ability to make overpayment claims under Sch 1AB or HMRC's powers of discovery, both of which sets of rules contain specific provision in relation to partnerships.

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Replying to Tax Dragon:
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By unearned luck
30th Aug 2019 01:44

You are right on both points. For the first I apologise and for the second I thank you.

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