Enterprise - Tax matters - as a partnership

Link: 
http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073789521&r.i=1073789533&r.l1=1073858805&r.l2=1085161962&r.l3=1073864308&r.s=m&r.t=RESOURCES&type=RESOURCES

Income Tax and Capital Gains Tax

The profits and gains of the partnership are shared among the partners. Each is personally responsible for paying tax on their share.

The nominated partner needs to register the partnership with HM Revenue & Customs (HMRC).

Each partner also needs to register themselves with HMRC. This helps HMRC set up the right tax and National Insurance records for both the partnership and partners.

Find out more about how to register partnerships and partners in our guide on registering for Self Assessment.

Every year each individual partner will need to complete a Self Assessment tax return to show the profits they get from the partnership.

The partnership should appoint one of its officers - the nominated partner - to fill in the Self Assessment Partnership Tax Return and send it to HMRC. This includes a Partnership Statement, which shows how profits or losses have been divided among the partners. The nominated partner should also ensure that all other officers are given copies of the Partnership Statement to help them complete their own tax returns. Although the nominated officer has responsibility for the Partnership Tax Return, all the partners are jointly liable for any penalties resulting from it being submitted late or incorrectly.

One of the easiest ways to send a tax return is online. See our guide on completing your tax return (partners and partnerships).

National Insurance contributions

As well as being responsible for their tax, individual partners are also responsible for paying their own National Insurance contributions (NICs). Partners normally have to pay Class 2 National Insurance contributions. If their annual profits are over a certain amount they also pay Class 4 contributions. For more information, see our guide on self-employed tax and National Insurance.

Corporation Tax

If partners are companies, they must pay Corporation Tax on their profits from the partnership, and should record the relevant figures on their Corporation Tax return.  For more see our guide introduction to Corporation Tax.

VAT

If the partnership has - or expects to have - turnover of more than £73,000, it will need to charge VAT to its customers and pass this on to HMRC. Use our interactive tool to find out if you need to register for VAT.

PAYE (Pay As You Earn) for employers

Partnerships with employees will need to collect and pay income tax and NICs, which will mean operating a PAYE (Pay As You Earn) system. See our guide on PAYE for employers: the basics.

To summarise: 

To calculate income tax, we first need to register our business with HM Revenue & Customs. Each partner also needs to register themselves with HMRC. Every year each individual partner will need to complete a Self Assessment tax return to show the profits they get from the partnership.

Individual partners are responsible for paying their own National Insurance contributions.

Partners normally have to pay Class 2 National Insurance contributions

If we have a turnover of more than £73,000, (which is more than likely) we will need to charge VAT to our customers and pass this on to HMRC.

Each of te partners are taxed on their share on the profit. 

Enterprise - Equipment costs

We decided it was about time we got an idea about finances, and how much setting up a business would really cost. We decided that we would only ever need 2 people in the studio (yet to be chosen) at any one time, in need of a computer. The idea is that we all have a desk, so we can keep our work based to our own area, to share storage for files, books etc. We also decided that there will be several situations in which we need a portable digital device to show clients potential work, present slide shows etc, so have included to price of a mac book and ipad.

All office equipment needed:

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We has a bit of a shock when we came to realise how much equipment, furniture and software we needed, and how much it would all cost. We created a spreadsheet to show the results.

To summarise:

Enterprise - Cost of living

cost of living forms

Enterprise - Starting up costs