Invoice paid to joint account

nd85_2

Very long time lurker, first time poster. Hello!

Firstly, apologies if this is a naive question.

My girlfriend and I are set to take on a freelance project together (we're in the same industry) for a client. The prospect of future projects is low, so I don't want to set up a Ltd company to trade since there are annual accountancy overheads. As such we plan to invoice and be paid directly. When I have done freelance work in the past I've always completed my self assessment to declare these additional earnings. However now we're working on a project together, I'm unsure of the most tax efficient way to achieve this given its a joint venture (although we'd bill as one).

I'm a higher rate rate, she is lower rate tax payer. Is it acceptable for the invoice to be in my name, have it paid into a joint account (or her account) and for her to declare it on self assessment? Other than my name on the invoice I wouldn't ever see any of the income.

Given that she'd actually be doing most of the work, and I do a lot of the admin (ie chasing and invoicing!) it would be true and honest for the invoice to be paid and declared by her not me.

The obvious alternative is to set up a Ltd co with both of us directors and she'd be able to withdraw funds and I'd choose not to.

Thoughts? Thank you.

pjclar02

Hello there

It sounds to me like the best solution would be to form a partnership, with your partner having the larger proportion of the profit split - you can work out the optimum split based on your relative earnings.

A partnership is a simple registration with HMRC, and requires basic accounts but no formal submission to Companies House.

nd85_2

pjclar02, thanks for the pointers. I had not considered a partnership, but after a lot of reading, setting up an "ordinary" partnership looks to be the best way to go. We'll use a basic partnership agreement that defines how the income should be split, according to our effort put into the work. This allows us to split the income and pay tax individually on the work we've both done on the project, which means we're taxed accordingly.

Perfect. Thanks for the tip.