So BIM82225 tells us that "Where there is a partial change in ownership, so that at least one partner carries on the business both immediately before and immediately after the change, and the partnership carries on the same business both before and after the change, the business is treated as continuing" and that "The commencement and cessation rules however apply to individual partners joining or leaving the partnership." BIM82260 states that a single partner continuing the trade alone has no discontinuation in his notional trade.
Facts of the case: Long established partnership (two partners, 10 years+), accounts prepared to 30th April each year. Partner B leaves the partnership on 30th April 2016, which coincides with the 2016/17 basis period. Partner B takes the same amount of profit for 2016/17 as he would have had he remained a partner. Box 9 of the Partnership Statement (of the 2017 partnership return) populated with leaving date 30 April 2016. There are no overlap profits.
Q1: Does all that in the paragraph above sound correct? Or am I missing something vital?
Q2: How will Partner A, the partner continuing as a sole trader, return his y/e 30 April 2017 profits for 2017/18? Will he use a partnership return (with one partner, himself) or will he use the self-employed pages of his SA return?
Many thanks.
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You really do not have a clue!
This is really basic stuff for anybody working in general practice.
Well the last time I came across this one could elect to make a (written letter) continuation election for a partnership's tax (yes, yes, way back during pre 1997 SA). It's a lot simpler these days now that PYB basis is removed.
You could - but that didn't mean you kept submitting partnership returns.
I think the 20+ posts are more a measure of the stupidity, rather than the complexity, to be honest.
Oh I don't know - let me guess. A partnership return is needed until there's no partnership, I suppose.
The nominated partner continues to have sole responsibility, even if he is the one who left.
Partnership ceased 30/4/16 so 16/17 is the last partnership return as long as you enter the cessation date in the box.
Partner B left, so he gets to apply cessation rules to his profit share in the 16/17 return. Why is there no overlap if the year is 30/4?
Partner A has to show commencement as a sole trader in his 16/17 return but he ticks the box that says there is no need to enter any income details unless he takes this opportunity to change his year end.
So his 2016/17 return shows full partnership profit share, and a nil sole trader page, but you should put on it any overlap he is still carrying forward.
017/18 will then have a sole trader page only with trading details of the year to 30/4/17 as usual.
Why is there no overlap if the year is 30/4?
Maybe they made a loss in year 1, whenever that was.
Not recommencing. just explaining why he doesn't have to fill the gap as partnership page shows cessation date
Hi. Back again. Sorry - got caught up in the January tax returns combined with grandchildren and birthday celebrations.
Which software are you using?
I have digita and the partnership profit share entry page has a box to tick if business changes from a partnership to a sole trader.
Am just going to set up a test case to see what schedules the software generates
Appologies - matters have obviously moved on since I last did this. HMRC guidance now says you don't have both types of schedules in the ongoing partner.
I have set up a test case in Digita and it has an automatic conversion procedure to follow, which results in a partnership return showing a cessation date for the partnership and the leaving partner but no cessation date for the continuing partner. No cessation date on the ongoing partner return and no sole trader pages.
Moving on a year it just creates a new sole trade page with the following year of accounts