Planning to start a partnership Business know the legal and Financial Aspects of the Business structure

Are you tied to a partnership business? Does your business have more than one admin? What is the taxation process in a partnership business? We have answers to all your questions on partnership business taxation.

The first thing that is required is the registration of the partnership business to HMRC. All the partners of a company would be filing the tax separately irrespective of registered self-assessment.

Registering a business partnership with the HMRC

In order to register your partnership firm with HMRC, you must follow these steps:

1. Every involved partner, as an individual, should register for self-assessment. You can visit the website of HMRC and do this in less than 5 minutes.
2. The second step is choosing a nominated partner who would take charge of returns and business records. In case you are not able to do that, HMRC will randomly pick anyone.
3. The last step is registering the partnership for self-assessment, which hardly takes five minutes and can be done online.

Calculation of business partnership tax

The partnership business works similar to sole trading in terms of profit calculation, and the tax is paid on profits. Basically, you are liable to taxation for the income that is retained after deducting all business expenses. The expenses can be anything as long as it sounds business-related that includes:

• Office rent, internet, refreshments, utilities
• Professional fees (legal and accounting)
• Marketing
• Advertising
• Banking Charges
• Cost of Sales
• Business-related equipment

The trading and business expenses should go in the trading, profit and loss account as this is the initial point.

Filing Partnership taxes in the UK

Note down five easy steps you need to follow while filing partnership tax in the UK:

• Estimate the exact profit after deducting all kinds of expenses. All you need to do is subtract the expenditures from the income.
• Make all the required and essential adjustments, like adding the full amount for work-in-progress deals, even if you haven’t invoiced the client.
• Distribute the profit amongst the partners in the respective ratio
• The next step is filing a partnership tax return, which the nominated partner would do.
• Every existing partner must file a self-assessment tax return and pay the Income-tax and national insurance individually.

It is always advised to put a profit-sharing ratio so that there is no problem related to profit distribution in future. The partners decide this ratio by their mutual agreement. However, it is not important to mention the percentage, but it is recommended to do so.

FinConcile is a team of accredited and seasoned specialists who specialise in accounting, tax, payroll, and compliance. Our team consists of CAs, lawyers, company secretaries, and other finance specialists who help accounting firms achieve long-term growth cost-effectively and accurately. Our outsourcing accounts department ensures accuracy in your business finances so that you can focus on your business well.