When you set up a business partnership you need to:
- choose a name
- choose a ‘nominated partner’
- register with HM Revenue and Customs (HMRC)
The ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records.
The rules are different for limited liability partnerships.and limited partnerships.
Naming your partnership
You can use your own name or trade under a business name.
You must include all the partners’ names and business name (if you have one) on official paperwork, eg invoices and letters.
Register the partnership with HMRC
You must register your partnership and its members with HM Revenue and Customs (HMRC). A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’ and can also be a partner.
Partners who are individuals pay Income Tax and National Insurance through Self Assessment.
If a partner is a company, it must be registered with HMRC for Corporation Tax
You can appoint an agent to deal with HMRC on your behalf.
You must register the partnership or individual partners by 5 October in your business’ second tax year, or you could be charged a penalty.
If you start a partnership or become a partner during the 2014 to 2015 tax year, you must register before 5 October 2015.
Register for Self Assessment
Each partner must be registered with HMRC for Self Assessment.
Your partnership must also be registered for Self Assessment. Choose a ‘nominated’ partner to either:
- register online - limited liability partnerships can’t use this service
- download and fill in form SA400
When the nominated partner registers the partnership they will automatically register themselves for Self Assessment.
Register for VAT
Your partnership must register for VAT with HMRC if their VAT taxable turnover is more than £83,000.
You can choose to register if it’s below this, eg to reclaim VAT on business supplies.
Any partner can register, either:
- by downloading and filling in VAT 1 and VAT 2
If you use the paper forms you still need to submit your VAT Return online. When you get your VAT number from HMRC, sign up for a VAT online account (select option ‘VAT submit returns’).
Once you’re registered for VAT you need to let HMRC know every time someone leaves or joins your partnership.
As the nominated partner you’ll get a letter from HM Revenue and Customs (HMRC) in April or May telling you to send a partnership tax return.
You can either complete the return:
- online - you’ll need to buy software
- on paper - download form SA800 if HMRC hasn’t sent you one
You must let each partner know their share of the profits and losses for their Self Assessment tax returns.
Send the partnership tax return by the usual Self Assessment deadlines.
If any of the partners are a company the deadline for:
- online returns is 31 January following the end of the tax year (or 12 months from the partnership’s accounting date if later)
- paper returns is 31 October following the end of the tax year (or 9 months from the partnership’s accounting date if later)
All partners can be charged a penalty if the partnership tax return is late.
You need to keep your records for 4 years after 31 January following the end of the tax year.
Report changes to your partnership
You need to tell HM Revenue and Customs (HMRC) about certain changes to your partnership.
If a partner joins or leaves
Any partner joining your partnership must register for Self Assessment.
You don’t need to tell HMRC a partner is joining unless the partnership is VAT-registered.
If your partnership is VAT-registered you must tell HMRC when a partner joins or leaves within 30 days - you can be fined if you don’t. Download and fill in form VAT 2.
When a partner leaves they still need to submit a Self Assessment tax return for the year they leave.
You must record the changes in the partnership tax return and in each partner’s Self Assessment return.
If a partner dies or is made bankrupt
If there are 2 partners:
- the partnership will be automatically dissolved
- the remaining partner must re-register for Self Assessment as a sole trader
If there are more than 2 partners:
- the partnership will be dissolved unless the partnership has agreed otherwise
If the nominated partner dies, the partnership must nominate another partner and tell HMRC as soon as possible. If they don’t, HMRC will nominate one and write to the partnership. That partner must then complete any outstanding partnership tax return.
Changing your name or address
Log in to Self Assessment online to report changes to your partnership’s name or address.
You must also report changes to the names or addresses of any of the partners.
If you’re VAT-registered you must also report a change within 30 days using VAT online services. You can be fined if you don’t.
Changing the nominated partner
You can change your nominated partner:
Closing your partnership
- as part of your partnership tax return
- by writing to HMRC
The nominated partner must send a partnership tax return for the final period of trading when you close a partnership.