What is a partnership?
A partnership is two or more people in business together and they are jointly and severally liable for the debts of the business. The profits of the business are split between them in whatever proportion they agree and are subject to income tax and national insurance.
Partnership Agreement
It is strongly recommended that a partnership agreement is put in place. This would normally set out the profit sharing between the partners, how management decisions are made and the position when there are new partners or when partners leave for whatever reason. If no partnership agreement is put in place the Partnership Act comes into force automatically and among others things it assumes that profits are split equally between the partners. Advice should be sought from us in the first instance in this connection.
Bookkeeping
Preparing bookkeeping records can be a time consuming and onerous task for business owners; we can help with all your general bookkeeping requirements either at your offices or at ours.
We can either employ our own in-house expertise or help you recruit the right person for your business.
Management Information
Regular management information is a vital aspect of managing and controlling a business. We will endeavour to work closely with you to get to know your business so that we can advise
on how to maintain and improve profits as the business grows and develops. Monthly or quarterly management accounts can be prepared to enable you to manage your business.
VAT
For turnover in excess of £73,000 it is compulsory for most businesses to be registered for VAT although it is possible to register voluntarily below that limit.
All businesses now have to prepare return forms (generally each quarter) and submit them online. In addition to the bookkeeping we can deal with all aspects of your VAT requirements and ensure that the VAT
regulations are fully complied with. Our VAT services cover registering and de-registering for VAT, preparation of accurate VAT returns, review of assessments and ascertaining whether the flat rate
scheme would be appropriate or advantageous.
PAYE
Employing staff results in a legal requirement to operate a PAYE scheme. We offer a payroll service using Sage software and this involves a weekly or monthly service, advising on the
PAYE and national insurance deductions, issuing payslips, forms P45 and P60. In addition the year end PAYE return form is automatically prepared by our systems ready for online submission.
Year End Accounts
For commercial and tax purposes it is necessary to prepare financial accounts for the period of trading which is normally for a 12 month period ending on the 31st March or 5th April. This gives a historic summary of what the business has achieved during this period and also forms the basis for the calculation of the tax liability arising thereon.
Self Assessment
A self assessment tax return form will have to be completed for the partnership showing the business income and expenditure in accordance with the accounts prepared. In addition a self assessment return form will have to be prepared for each individual partner disclosing the individual's full income for the tax year including his or her share of the partnership profits. These returns have to be submitted to HMRC by 31st January following the tax year end. For example, for the 2011/12 tax year the return is due for online submission by 31st January 2013.
Personal Tax
A partner's partnership profit share is added to their other personal income to arrive at the total income taxable on them as an individual. The income tax rates currently applicable are 20% from £0-£35,000, 40% up to £150,000 and 50% on the excess.
National Insurance
A partner pays both class 2 and class 4 national insurance. Class 2 national insurance is £2.50 per week payable either monthly by direct debit or every 13 weeks direct. Class 4 national insurance is 9% on net business profits between £7,225 and £42,475. Over £42,475 the rate is 2%. Class 4 national insurance is payable at the same time as the income tax (see below).
Payment of Tax/Class 4 National Insurance
Payment of tax and class 4 national insurance is every 6 months on 31st January and July. When a business first commences, depending on timing, there can be a long period before tax becomes payable and it is paramount that a tax reserve is retained on an ongoing basis to avoid cash flow problems in the future.
