What is a Partnership?

by Readers Question

8 months ago

What is a Partnership?

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What is a Partnership?

I have been looking at Property 118 for several months now and have found it a great help in the current climate. I have been wondering if your optimal tax planning strategies would be applicable to my wife and I.

I note that it is said that a partnership is required beforehand to take advantage of incorporating?

We purchased our first letting property in 2002 and now have 14 x houses as single lets (2 x unencumbered).

My wife and I are not in a partnership for the rental properties, but hold them as joint tenants.

I am not trying to shirk around paying the £400 consultation fee, but just wanted your view on the partnership thing, before we proceed.

Your help is greatly appreciated.

Kind regards

Ian

REPLY FROM MARK ALEXANDER

Hello Ian

Based on what you have explained it is highly likely that you are in fact a partnership.

There is no legislation to compel landlords to register a partnership with HMRC, or to obtain a partnership UTR (Unique Tax Reference) for a partnership.

The legislation in regards to what constitutes a partnership goes back to 1890, please see the link below.

https://www.legislation.gov.uk/ukpga/Vict/53-54/39/section/1

I quote Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.”

The words I have highlighted are important. The link below is to HMRC’s internal manuals, which answers questions in regards to HMRC’s definition of business.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65715

I look forward to receiving your consultation booking and being of further assistance. Please see the link below.

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Comments

Richard Adams

8 months ago

I have come across disputes between partners who have happily shared profits in the good times but when times are hard one quits. Am I right that partners also share liabilities ie debts etc so just jumping ship does not let a partner off the hook. The argument often used by jump ship partners of a failing enterprise is "We never signed a formal partnership agreement". From the 1890 Act it would seem irrelevant whether a formal agreement exists or not.

Mark Alexander

8 months ago

Reply to the comment left by Richard Adams at 04/11/2017 - 14:19
Correct

Richard Adams

8 months ago

Thanks Mark. I'm delighted to have got something right!

jeanette Kirkby

8 months ago

Hello mark
My husband and I run our property business as individual sole traders. My husband works full time in the business and I work 20hrs per week in the business. We own all of our property in joint names and all of our AST contracts are in joint names.
Can we obtain a partnership UTR (Unique Tax Reference) for a partnership from HMRC ourselves?

Mark Alexander

8 months ago

You can indeed, what is it that you’re trying to achieve?

In law you may already be a partnership

jeanette Kirkby

8 months ago

The new tax laws will effect us greatly. It seems the only way is to move our properties into a Ltd company. I feel we meet the partnership rule so the CGT and SD should be fine - it is the financing. What are the rules on this?

Mark Alexander

8 months ago

Reply to the comment left by J Kirkby at 05/11/2017 - 11:52
Please see the link below

https://www.property118.com/tax/beneficial-interest-company-transfer-bict-structure-explained/

I look forward to hearing from you offline

ROB LAMB

6 months ago

Hi Question My small portfolio is mainly all in my name, I have 5 and myself and wife are named on a further 2 , does this cause a problem with incorporating and sharing the benefits??

Mark Alexander

6 months ago

Not necessarily, properties are often owned at legal level by indivial partners for partnerships for a variety of reasons.

It is how you generally run your portfolio which will determine whether you are a business and a partnership under the Partnership Act 1890 definition.

Please book a consultation with me to discuss further. Incorporation May or may not be the best strategy for you anyway.

The process is risk free on the basis that if you are not entirely satisfied the £400 consultation fee is refundable in full.

Sam

3 months ago

Reply to the comment left by Mark Alexander at 05/01/2018 - 19:51
Hi Mark, I have a small portfolio of properties which are in joint names with my wife except for one property which is soley in my name. I wish to give 50% beneficial interest (not legal) to my wife via DOT in order to achieve future partnership status with a view to incorporate in the future. The issue with 50% beneficial transfer is SDLT as the property has a mortgage. If I transfer 15% of mortgage consideration which is below £40K threshold, I could avoid SDLT. Would this work for partnership return to HMRC or I need to transfer a bigger interest ?

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