Partnerships (1) Flashcards
What is a partnership?
A group of individuals who are trading together
How are partnerships treated?
As separate entities from partners for tax purposes
What happens with partnership for tax purposes?
Needs to have its taxable income split among the partners
How is a business partnership treated?
Like a sole trader for the purposes of computing its profits
Are partners’ salaries and interest on capital deductible expenses?
No and must be added back in computing profits, because they are a form of drawings
Where partner own assets individually?
CA must be calculated in respect of such assets
Where must CA go?
Into partnership’s tax computation as they must be claimed by the partnership, not by the individual partner
How is profits or losses divided?
Between partners according to profit-sharing arrangements in the period of account concerned
If any of the partners are entitled to a salary or interest on capital?
Apportion this first. The residue of profit is then split according to agreed profit-sharing ratio (PSR)
How is each partner taxed like a sole trader (starts and finishes)
Starts when they join the partnership. Finishes when they leave the partnership
How is each partner taxed like a sole trader (same period)
Has the same periods of acocunt as the partnership
How is each partner taxed like a sole trader (profits and losses)
Makes profits and losses equal to partner’s share of partnership’s profits or losses
Partnership loss reliefs (trading profits)
Carry forward against future trading profits
Partnership loss reliefs (general income)
Set off against general income of the same and/or preceding year. Claim can be extended to set off against capital gains
Partnership loss reliefs (new partner)
Losses in first four tax years of trade can be set off against general income of the three preceding years
