Partnership overlap profits

Bells Registered, MAAT Posts: 11
edited March 2021 in Business Tax

A sole trader with a YE 31/08/2019 became a partnership with his wife on the 1/9/2018.

For the original sole trader for the tax year 2019/2020 partnership profits are based on the YE 31/8/2019. No overlap profit for the tax year 2018/2019 - as this partners commencement of notional trade is treated as having commenced when they commenced as a sole trader.

The new partner, the wife, has two basis periods 1/9/2018 to 5/4/2019 ( 2018/2019 tax return) and 1/9/2018 to 31/8/2019 (2019/2020 tax return). There will be overlap profit.

Do you agree this treatment is correct?

Also, HMRC is asking for the completion of 2018/2019 and 2019/2020 tax returns to be completed for the partnership. They are saying the profits need to be split accordingly, 2018/2019 (1/9/2018 to 5/4/2019), 2019/2020 (1/9/2018 to 31/8/2019). Is that correct the 2018/2019 tax return needs to show the ‘overlap’ profit? I was thinking it would be a nil return and the overlap profit only shown on the individuals tax returns?

Many Thanks for your help in advance.
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