Partnerships & personal tax

loralu

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!

deanshepherd

How the profit is split is entirely up to the partners. It can change every year if they so wish.

loralu

so its ok in the opening years when the same accounting period gets taxed twice that the split is different?

sloshed

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