Partner Or Sleeping partner

matthewfc

Hello
I am registered as self employed (Sole Trader) and my business is starting to grow. I am toying with the idea of going into partnership with my wife to utilise her tax allowance. My question is this. Obviously I will still be doing all the work so can I register her as a 'sole partner' and therefore she won't have any National Insurance liabilities.

Basically when the tax assessment is completed for both of us I would want to split the profits equally and be taxed as such. Is this possible as a sleeping partner?

Thanks

Matt

fengirl_2

I don't know what you mean by sole partner. The sole trader business would change into a partnership. You can agree to split the profits in any way you choose and if your wife's share was under the NIC threshiold, then she would claim small earnings exemption, and would also not be liable to tax. She would still have to self asses and declare her share of the profits.
You need to take professional advice before you go into this.

matthewfc

Hi. Sorry. I meant 'Sleeping Partner'

matthewfc

The business is doing quite well at the moment and I don't want to go over the 40% tax limit. If we were a partnership we each would be safely within that. In reality my wife won't be actually doing anything so can she be a 'Sleeping Partner' and therefore not pay NI contributions.

I want to share the profits equally and I imagine we will both be earning about 25-30K a year.

Is all this allowed as we also would like to move house in a few years and have to consider that the correct figures are shown on the tax assessment for our mortgage application.

Thanks

fengirl_2

A sleeping partner is someone who invests in the business but takes no active part in it. I dont think that's what you envisage. You want your wife to take half the profits without her doing anything or investing anything in the business, just for tax reasons. As I said, you need to take professional advice as HMRC might have a problem with this.

sdooley

You should get general legal as well as tax advice as your wife will be personally liable for the businesses debts if she becomes a partner (even a sleeping partner) which would not be the case if you set up a company or a limited liability partnership. Do you use an accountant to do your tax returns? s/he might be the first point of call.

LittleVoice

Is "sleeping partner" the same as "common law wife/husband"? I.e. not recognised in law if something goes wrong?

kippen_noedel

matthewfc wrote: »

Hello
I am registered as self employed (Sole Trader) and my business is starting to grow. I am toying with the idea of going into partnership with my wife to utilise her tax allowance.

Look into forming a Limited Partnership , ask an accountant or solicitor.
http://www.companieshouse.gov.uk/about/gbhtml/gb02.shtml

guidance booklets
http://www.companieshouse.gov.uk/about/gbhtml/gbllp1.shtml
http://www.companieshouse.gov.uk/about/gbhtml/gbllp2.shtml

Jacka87

Ok what you are trying to do is sounding a bit on th edodgy side.

A simple alternative is that instead of expanding your business. You set up a second business in your wifes name, and she covers the areas where you where going to expand into.

So for example, you are a shopkeeper, looking to buy a second shop to expand the business. Instead she buys the second shop and you both own a business each. Even if you help her immensly in the running of it.