CH 16 - Introduction to Partnerships

Question 1

List steps to follow
for Partnership accounts to tax

Answer 1

Step 1: Adjust profits

Step 2: Allocate profits between the partners

Step 3: Tax the partners as if they were individual traders

Question 2

What are usual pre-allocation adjustments to trading income under partnerships?

Answer 2

Salary
&
Interest on capital

Question 3

How other income is taxed under partnership?

Answer 3

Exactly same way as trading profits, but showen separately on separate line as other income using the profi-sharing ratio.

Question 4

How is taxed income from an office
or
employment of a partner ?
(not from an employment as a director)

Answer 4

its a subject to a certain conditions but its treated as a trading income of partnership

(ITEPA 2003, s.6(5); ITTOIA 2005, s.16C)

Question 5

What is a cap on relief from qualifying loan interest paid?

Given its taken out to fund a capital contribution to the partnership.

Answer 5

Relief for this qualifying loan interest paid (and certain other reliefs including trade loss relief against non-trading income)

is capped at the greater of:
* £50,000
and
* 25% of the individual’s adjusted total income for the tax year.

ITA 2007, s.24A)

Question 6

Who must register partnership?

Answer 6

The nominated partner must register the partnership with HMRC when it is first formed.

Question 7

Does partnership tax return needs to be filed?
if yes when

Answer 7

A partnership tax return must be completed and filed by the nominated partner within the normal deadlines.

The individual partners must also file their own tax returns.

Question 8

What are deadlines for partnership
in respect of amendments?

Answer 8

in respect of amendments & enquiries same rules apply to a partnership returns

any amendment to a partnership return will result in corresponding amendments to the individual partners returns.

and

any enquiry into a partnership return will automatically extend to the individual parters’ returns

TMA 1970, s.12AC(6)