Partnerships in the UK have a less formal structure than limited companies but are not tax-free. Perhaps the most important duty for partners is to submit the partnership tax return to HMRC each year. For novices, it can seem intimidating. But with some guidance, filing a partnership tax return can be considerably simpler.
If you’re new to the world of partnership taxation, learning how it works and what is required will allow you to fulfil your obligations and not incur penalties.
Learning the Fundamentals of a Partnership Tax Return
For a partnership business, HMRC requires an annual partnership tax return (SA800) to be submitted. This is to report the business income, expenses, and profit-sharing between partners. Partnerships are not taxed; however, each partner is taxed individually on his or her share of profit.
Both partners must also complete a personal tax return (SA100), with the partnership pages (SA104) to reflect their proportion of the business earnings. The two-stage reporting ensures that HMRC receives the full picture of business performance alongside individual earnings.
What Information You Need to Gather
To complete the SA800, you’ll need details of the partnership’s income and expenses for the financial year. Common documents include bank statements, sales records, invoices, payroll information (if applicable), and receipts for allowable expenses.
If the partnership has capital allowances, gains, or made contributions to pension schemes, those will also need to be reported. Being organised throughout the year makes this step significantly easier.
How and When to File Partnership Tax Return
The filing date for your partnership tax return depends on the method of filing. In the event of paper filing, the filing date is 31 October of the close of the tax year (ending 5 April). In the event of online filing, the filing date is 31 January.
Late filings can attract penalties, even if no tax is due. That’s why it’s important to prepare your records early and avoid the last-minute rush.
Common Mistakes to Avoid
One of the biggest mistakes beginners make is assuming only one return is needed. Remember, both the partnership and each individual partner must file their respective tax returns.
Another frequent issue is misreporting expenses or not accounting for relevant adjustments like capital allowances. Using accounting software or seeking advice from an accountant can prevent these errors.
Conclusion
Filing a partnership tax return doesn’t have to be intimidating. With a clear understanding of what needs to be done and some easy preparation, even new filers can do it with confidence.
The secret is to remain organised, grasp the double reporting requirements, and comply with HMRC’s timetables. If it seems like too much to handle, seek professional advice in order to be in compliance and have a clear mind.
