Tax & Small Business

snick182

Evening

My partner and I are both health professionals and hope to set up an independent private practice together, but are unsure how to register the business for tax purposes. I work full time for the NHS and my partner works part time - therefore my partner would be doing more work for our business, but I would still take on work when I find the time. As my partner’s other earnings are below the 40% tax threshold (and mine are not) can we register the business in her name for tax purposes, and if we do how would I be considered by the taxman? Could I work for free for the business?

Thanks

00ec25

it would be regarded as a partnership and any attempt by you to pass off your income as her earnings would be seen as deliberate tax evasion, which is illegal

just set yourselves up as a partnership, you are then perfectly free to allocate the split of the profits anyway you see fit, for example: 0/100

end result is the same, but the "mere technicality" of you committing tax fraud does not then occur.

snick182

Thank you for the advice. I was concerned about potential tax evasion hence my question :-) So if we set up as a partnership, we then each pay tax on whatever profits are allocated to us. I'll look into partnerships further

snick182

I've done some reading around partnerships, which raised a couple of questions I'm struggling to find a clear answer for. As we are in a relationship (not married but live together with a joint mortgage) would the HMRC apply the rules for a 'married couple' to us? Would that impact upon how we can split / allocate the profits from the perspective of the HMRC? It may well be best to seek the advice of an accountant!

[Deleted User]

snick182 wrote: »

I've done some reading around partnerships, which raised a couple of questions I'm struggling to find a clear answer for. As we are in a relationship (not married but live together with a joint mortgage) would the HMRC apply the rules for a 'married couple' to us? Would that impact upon how we can split / allocate the profits from the perspective of the HMRC? It may well be best to seek the advice of an accountant!

How you split the profits is of no concern to HMRC and you can change the ratio as often as you wish. You may be thinking of jointly owned properties and rental income which is a completely separate issue.

One word of advice from one who specialised in partnership taxation for many years - make sure that you know what you are doing. You must file a partnership return AND individual returns each year. A mistake one the partnership return renders three returns incorrect. The accounts for the partnership go nowhere near the individual returns - to name just two of the many errors that are commonly encountered.

Pennywise

snick182 wrote: »

As we are in a relationship (not married but live together with a joint mortgage) would the HMRC apply the rules for a 'married couple' to us?

What rules in particular do you mean?

Lots of people are in partnership together who aren't related or living together.

But generally, no, for tax purposes, couples living together aren't treated as married. So any "married" exemptions or reliefs you were thinking of won't be applicable.

snick182

I think what I read may have only applied to rental income.

snick182

Thanks. I'm increasingly realising how complicated this area is potentially. I think it will be wise to use for an accountant for the first year.

00ec25

snick182 wrote: »

Thanks. I'm increasingly realising how complicated this area is potentially. I think it will be wise to use for an accountant for the first year.

let me rephrase that: it will be essential to use an accountant for the first year