Partnerships & personal tax

loralu
loralu Registered Posts: 64 ? ? ?
Heres the situation:

Husband (H) and wife (W) partnership - accounts period 21/5/07 - 31/5/08 so just over twelve months. Profit say £10,000.

For 07/08 (21/5/07 - 5/4/08) H had employment income so we gave most of the profit to the wife, say £2500 H and £7500 W therefore H got taxed on (321days/377days) £2129 and W £6386

For 08/09 they will be assessed on the 12 months to 31/5/08 so 366/377. H does not have employment income so it would be better to split the profits 50:50. My question is as we have already split the profits for the accounting period 31/05/08 in the way we did for 07/08 can we change the split of the same accounting period for 08/09?

Hope this makes sense!

Comments

  • deanshepherd
    deanshepherd Registered Posts: 1,809
    How the profit is split is entirely up to the partners. It can change every year if they so wish.
  • loralu
    loralu Registered Posts: 64 ? ? ?
    so its ok in the opening years when the same accounting period gets taxed twice that the split is different?
  • sloshed
    sloshed Registered Posts: 100 ? ? ?
    Hi

    As partnership income is taxed on the individual and not the partnership, each partner will have their own tax liability, overlap profits and basis period so it is ok to have a different split. However you should make sure there is an partnership agreement in place otherwise the partnership act 1890 will apply, which means that all profits / (losses) are shared equally.

    Hope this helps

    Brian
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