Partnership Profit Sharing

ben9090

Hi
A couple of years ago we started doing quite a lot of trading on ebay so registered a business as a partnership between my wife and myself.
We turned over about 25k and made a 6k profit so are filling it out on the cash basis method.
Im currently filling in out first Partnership Tax return but can anyone advise if there are any recognised ways to split the profits?
I want to put as much through my wife as possible as Im in the 40% tax bracket and she only works part time so can I split it 10%/90% or even 5%/95%? Will it rasied any eyebrows or should they be happy with whatever we tell them?
Any advice would be very gratefully received.
Thanks
Ben

Pennywise

No, as long as it's a genuine partnership and you both work in it, then you're free to split the profits as you wish.

ben9090

Thanks for the reply. We could easily explain that I do the paperwork/accounts, she does the picking, packing, post office, courier runs etc so day to day she does the vast majority.

I just wasnt sure if it would raise any tax avoidance alarm bells at HMRC even though its relativly small amounnts

Thanks

Ben

purdyoaten

Profits can be split in any way that you choose - even 100% -0%. Also consider a fixed share for your wife e.g. she earns £4000 part time - her share of partnership profits are fixed at £6000, regardless of the actual profit made by the partnership.

Just be careful if the busines should expand- there are points where savings are maximised. While your wife may pay tax on the profits at 20% with you at 40%, it could be that more of the profits are charged to Class IV NIC at 9% as opposed to 2% for higher rate taxpayers.

Finally, make sure that your wife knows that she is a partner! Seems silly, but MANY years ago HMRC were not averse to ringing wives to see if they were indeed aware of their status - not wonderful if they maintained that they were a housewife!