Partnership - is it necessary

Carole

Hi, I'm quite new here as I work in industry and only prepare a few sole trader accounts for friends.

One of these is currently a sole trader as an equine dentist with some income for horse livery services. However he has just taken on more livery clients and his fiance is going to help with the work.

Is it necessary to register a partnership with HMRC or can they both operate as sole traders and just split the income and expenditure?

We are only looking at a turnover of about 20K p.a. here combined.

Many thanks

Gem7321

If they were to each register as sole traders it's not as simple as just splitting the profit - they would have to invoice each other for work done and it can get quite messy. I think this needs careful tax planning and we need to know more about the fiance. It may be tax efficient to have the fiance as an employee but it's difficult to say without knowing more about the fiances circumstances.

Carole

Thanks, the invoicing to each other would never work.

I'll advise to start a partnership. The fiance has no other income, she lives off savings and ISA interest therefore making no use of her PA.

Monsoon

If they are working together in the same business, she is either a partner, or she is an employee. She can't really be an external sole trader (and as Gem says it's complicated).

If she's not using her PA, then being a partner may well be tax efficient.

Carole

Thanks again

Gem7321

Or maybe an opportunity for incorporation? Then they can both take a tax efficient salary and avoid class 4s. But, again, this depends on their individual circumstances.

deanshepherd

Is it so complicated to subcontract out the livery work to the fiance?

I'm assuming she is not a trained equine dentist so a partnership is not necessarily the most appropriate/obvious solution.

Both seem pretty straight forward options to me, albeit with a few extra apportionments to calculate each year.