Any advantages to a partnership?

Sim_2

Myself and two colleagues provide a service to a local hospital to fee paying patients. The hospital manager would rather we formed a group (a partnership I suppose?) so that all the work we do gets paid to the group rather than individuals. The only reason they are suggesting this approach is reduce their paperwork. We all have main jobs, one of us paying 40% tax. We would have no overheads and no cost, the partnshsip would simply be a means of receiving money for our services. Would there be any advantage to us to do things this way?

telly-addict

From a tax point of view, you would be taxed as a partner in the same way as you would as a self-employed individual. I am not going to go down the 'employed/self-employed/IR35' route as that is a whole different topic and I will assume you are self-employed.
It would definitely help the hospital as you would raise one invoice, say monthly, for all your services, which they would pay.
What would be tricky, though, is how you would divide up the fees. Unless the partnership agreement states otherwise, the Partnership Act 1890 assumes the income is split equally. Say you have a profit sharing ratio of 1:1:1, this is fine if you have all done the same amount of work that month. But this is unlikely.

For this reason, I would avoid a formal partnership (that would need to file it's own partnership Self Assessment return and strictly should have some accounts too) and just bill the hospital monthly in arrears on a combined basis, e.g. Services for June 2005 Mr A £300, Mr B £400, Mr C £340 or whatever and then have some mechanism of splitting the remittance from the hospital when they pay. This could be a joint bank account with a cheque book only so you could withdraw your share, you might want to require 2 signatories on the account - it depends how much you trust each other!

Hope that helps - it isn't really a tax question as such. Would you be billing the hospital more than £55,000 a year? If so, VAT comes into it and that would require some more formalities.