Withdraw Partnership Profits as Capital returned

I have profits and to save tax can I take back money I put into partnership

Didn't find your answer?

I used my own funds to start the partnership and now we have profits can I take these funds back before paying tax and reduce my tax bill,Thank You

Replies (19)

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By Cylhia66
08th Dec 2023 07:23

Can you draw funds to refund yourself the capital you introduced? = Yes

Will this movement of fund reduce your tax bill? = No

Have you considered having an accountant on board to make sure you get things right?

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RLI
By lionofludesch
08th Dec 2023 07:48

Crazy idea, I'm afraid.

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Replying to lionofludesch:
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By Tax Dragon
08th Dec 2023 08:01

Not crazy at all. Just asked by someone who hasn't read Pt 9 of ITTOIA - or, if they have, either didn't understand it in isolation or didn't know enough about the rest of ITTOIA to understand it in context.

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By SXGuy
08th Dec 2023 08:01

Let's see. Did you pay tax on the funds you invested in to the business? Ah.

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Replying to SXGuy:
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By Tax Dragon
08th Dec 2023 08:05

SXGuy wrote:

Let's see. Did you pay tax on the funds you invested in to the business? Ah.

And?

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Replying to SXGuy:
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By Cylhia66
08th Dec 2023 08:23

SXGuy wrote:
Let's see. Did you pay tax on the funds you invested in to the business? Ah.

I'm with Tax Dragon. He probably has to be fair.

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Replying to Cylhia66:
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By Markp9631
08th Dec 2023 08:37

Yes the partnership is myself and wife,we cashed our pensions in to start the business and kept all records ,does not seem right we have to pay tax to take it back out ?

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Replying to Markp9631:
RLI
By lionofludesch
08th Dec 2023 08:43

Markp9631 wrote:

Yes the partnership is myself and wife,we cashed our pensions in to start the business and kept all records ,does not seem right we have to pay tax to take it back out ?

You don't.

Let's start with why do you think you do?

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Replying to lionofludesch:
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By Markp9631
08th Dec 2023 08:57

My accountant says so,although I have all documents and statements to show funds introduced,even some on this thread says I have to ,I take my own money back out but pay tax on it ,does not seem right,not sure what to say to accountant .

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Replying to Markp9631:
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By Geoff56
08th Dec 2023 09:16

You will pay tax on the profit made. Your drawings do not affect profit/tax in any way whatsoever.

(We are definitely talking about a partnership and not a limited company?)

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Replying to Geoff56:
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By Markp9631
08th Dec 2023 09:25

Partnership
If I have £50k in bank for the tax year and take out £30k that it owes me do I pay tax on £20k
Thanks for all the responses appreciated and keep coming

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Replying to Markp9631:
By Duggimon
08th Dec 2023 09:28

No. You pay tax on the profit the partnership makes. What you take out or don't take out of the business does not affect it in any way.

You don't pay tax on taking out money from your capital account. Taking out money from your capital account does not reduce your tax bill because it has no effect on your tax bill, it is not an expense of the business and not income for you personally.

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Replying to Markp9631:
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By Cylhia66
08th Dec 2023 09:28

Markp9631 wrote:

Partnership
If I have £50k in bank for the tax year and take out £30k that it owes me do I pay tax on £20k
Thanks for all the responses appreciated and keep coming

Depends if the £20k is capital you invested or profit? You only pay tax on profit made.

EDIT: If the company owes you £30k and you take out £30k, yes, you will pay tax on the £20k profit.

EDIT 2: Even if you take out £50k, you still pay tax on the £20k profit.

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Replying to Cylhia66:
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By lionofludesch
08th Dec 2023 10:01

Cylhia66 wrote:

EDIT: If the company owes you £30k and you take out £30k, yes, you will pay tax on the £20k profit.

It's not a company.

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Replying to Markp9631:
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By Geoff56
08th Dec 2023 09:32

Forget what's in the bank and how much you've taken out. How much profit do the accounts show that the business made?

What you take out is not a deduction from the taxable profit. If you make zero profit but take out £20K, you will pay no tax. If you make £50K and take out £20K, you will pay tax on £50K.

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By Tax Dragon
08th Dec 2023 09:51

From what you are saying, you have an accountant and your accountant has answered your question.

As a rule, listening to many voices can be more confusing than listening to one voice.

Be reassured (as everyone here is saying, in their different ways) that your accountant is correct.

[My way of saying it: the partnership has made a profit and someone has to pay tax on that profit. If not you, then who?]

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Replying to Tax Dragon:
RLI
By lionofludesch
08th Dec 2023 10:06

Tax Dragon wrote:

From what you are saying, you have an accountant and your accountant has answered your question.

As a rule, listening to many voices can be more confusing than listening to one voice.

Be reassured (as everyone here is saying, in their different ways) that your accountant is correct.

[My way of saying it: the partnership has made a profit and someone has to pay tax on that profit. If not you, then who?]

He says his accountant says he has to pay tax on money he put in and is now taking out.

Are you saying his accountant is right? Just to be clear. Because that's how it seems to me.

For me, there are two possibilities.

a. Accountant is not very good at taxation.
b. Accountant is not very good at explaining things.

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Replying to lionofludesch:
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By Leywood
08th Dec 2023 10:40

3
c. OP has a case of Chinese whispers between ear and brain.

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Replying to Leywood:
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By Tax Dragon
08th Dec 2023 10:57

Which confusion this thread has made worse.

One answer was all that was needed. Cylhia66 provided that answer in the first reply.

Everything thereafter goes to show yet again why you shouldn't get your tax advice from open-to-all forums.

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