A sole trader draws his accounts up to 31 May. His wife may join as a partner on 1 Oct 21.
Thanks in advance for any assistance with the basis periods.
Profits approx £15k a month so this is the first step in working out timings and benefits; overlap profits £30k. (Incorporation not a goer.)
Him:
2021-22: Accounts to 31/5/21
2022-23: Profits 1 June to 30 Sept in self employment. Share of Profits 1 Oct to 31 May 22 in partnership section.
Can't use overlap profits b/f as no change in accounting date. If change the following year to, say, 31 March, then can use overlap relief.
Her:
2021-22: Share of Profits 1 Oct 21 to 5 April 22
2022-23: Share of Profits 1 Oct 21 to 30 Sept 22 as first 12 months.
If change the year end in due course then her overlap profits can be used.
Replies (9)
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Looks fine to me.
Current profits seem to be about five times overlap relief. Looking ahead, how do you intend to manage that?
It'd depend on whether the partners foresee profits increasing indefinitely or reducing as activity reduces approaching retirement.
I may have misunderstood the way you intend to report 'His' profits for 2022-23 but I don't believe you should split them between the S/E and partnership sections. I think the whole accounting year to 31/5/22 will be reported through the 2023 partnership tax return and then the partnership section of the SA100s. See page 10 ofhttps://assets.publishing.service.gov.uk/government/uploads/system/uploa...
I am open to correction, but I understand this to be the way it should be reported. It's a while since I had to do one of these.
Thanks Geoff. It is hypothetical at the moment as they don’t like change. The numbers point towards a partnership so that is all I am doing at the moment. I will look at how to complete the partnership pages if they go ahead. I just wanted to check 30 Sept wasn’t the end of an AP for him so he gets taxed on profits to 31 May either way.
He does - but the profits may be different if a partner is admitted mid year.
I would tend to prepare accounts to the date of admission of the new partner. Nothing to stop you preparing accounts to 30 Sept 2021 and then returning to 31st May 2022 if that's what suits you.
But - much depends on the numbers. It should be easy enough to prepare accounts under both plans and see what works best.
At £200,000, he probably needs to start sharing his profits as soon as possible.
Why are you waiting until October ?