salaried partner

purdyoaten

zygurat789 wrote: »

i'm not sure what he is trying to achieve. What are the salaried partner's expenses? If they are normal business expenses they shoukld have been charged to P & L and that's the end of the story.
I think he sounds as if he is still trying to complete the sole trader pages.

Not always. For example - a doctor's practice would invariably have expenses which are all included in the accounts but do not adhere to the partnership sharing ratio (professional subs)- similarly there is specific income (seniority depending upon service) which is included in turnover but will definitely not be allocated according to the partnership ratio.

You could have a 50-50 partnership where one drives a Mercedes and the other a VW Golf. The Golf driver would not be content with being hit for 50% of the overall motor expense in the P + L.

E.g. Partner A has motor expenses of £4000 and partner B has £2000 and, after all expenses and addbacks (including these motor expenses), the profit is £50000.

The calculation of split is:

Attributable profit: £50000 plus motor expenses £6000 = £56000

Partner A - 50% = £28000 less motor expenses £4000 = £24000
Partner B - 50% = £28000 less motor expenses £2000 = £26000

If partner A had seniority included in turnover of, say, £5000, he would not want partner B to have 50% of this and so, ignoring the motor expenses:

Attributable profit: £50000 less seniority £5000 = £45000

Partner A - 50% = £22500 plus seniority £5000 = £27500
Partner B - 50% = £22500
Total - £50000

Partner A is assessable on £5000 more than B on the £50000 which is correct and just, not just for tax but for superannuation purposes too!

That is a very simplistic approach as there could be many strands of income and very differing expenses. I have dealt with doctors, dentists and solicitors partnerships for many years - always a pain!

I think that we can both agree though that the poster should think twice about completing the form with his/her level of knowledge.

zygurat789

purdyoaten wrote: »

Not always. For example - a doctor's practice would invariably have expenses which are all included in the accounts but do not adhere to the partnership sharing ratio (professional subs)- similarly there is specific income (seniority depending upon service) which is included in turnover but will definitely not be allocated according to the partnership ratio.

You could have a 50-50 partnership where one drives a Mercedes and the other a VW Golf. The Golf driver would not be content with being hit for 50% of the overall motor expense in the P + L.

E.g. Partner A has motor expenses of £4000 and partner B has £2000 and, after all expenses and addbacks (including these motor expenses), the profit is £50000.

The calculation of split is:

Attributable profit: £50000 plus motor expenses £6000 = £56000

Partner A - 50% = £28000 less motor expenses £4000 = £24000
Partner B - 50% = £28000 less motor expenses £2000 = £26000

If partner A had seniority included in turnover of, say, £5000, he would not want partner B to have 50% of this and so, ignoring the motor expenses:

Attributable profit: £50000 less seniority £5000 = £45000

Partner A - 50% = £22500 plus seniority £5000 = £27500
Partner B - 50% = £22500
Total - £50000

Partner A is assessable on £5000 more than B on the £50000 which is correct and just, not just for tax but for superannuation purposes too!

That is a very simplistic approach as there could be many strands of income and very differing expenses. I have dealt with doctors, dentists and solicitors partnerships for many years - always a pain!

I think that we can both agree though that the poster should think twice about completing the form with his/her level of knowledge.

Somepeople can spend more time, money and effort on dividing the profit rather than earning it, usually the rich professionals as above, who, of course, can afford an accountant to do the thinking and calculating for them.
Yes the OP needs to keep this very simple or it won't get filed in time.

purdyoaten

zygurat789 wrote: »

Somepeople can spend more time, money and effort on dividing the profit rather than earning it, usually the rich professionals as above, who, of course, can afford an accountant to do the thinking and calculating for them.
Yes the OP needs to keep this very simple or it won't get filed in time.

I would definitely agree although sometimes the very idea of one partner getting more than the other is traumatic.

I recall having to redo a tax computation for a ten doctor practice beacuse only seven of them paid for the biscuits!

Having said all that, since the new GP contract, the amount of income streams received by a GP practice in any month is just ridiculous - up to thirty! It is just impossible to allocate according to fixed percentage shares.

zygurat789

purdyoaten wrote: »

I would definitely agree although sometimes the very idea of one partner getting more than the other is traumatic.

I recall having to redo a tax computation for a ten doctor practice beacuse only seven of them paid for the biscuits!

Having said all that, since the new GP contract, the amount of income streams received by a GP practice in any month is just ridiculous - up to thirty! It is just impossible to allocate according to fixed percentage shares.

Only 10!
When I was a lad in the days pf the PY basis I worked on a stockbrokers, 15 partners. The rules were each partner had to provide for tax on the cessation basis and this was before PCs. Fortunately I didn't work in the tax department.

purdyoaten

zygurat789 wrote: »

Only 10!
When I was a lad in the days pf the PY basis I worked on a stockbrokers, 15 partners. The rules were each partner had to provide for tax on the cessation basis and this was before PCs. Fortunately I didn't work in the tax department.

Cy, Cy or Py, Py -- those were the days!:)