What is a Partnership?

by Readers Question

22:08 PM, 29th October 2017
About A year 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

Mark Alexander

7:50 AM, 27th March 2018
About 9 months ago

Reply to the comment left by Sam at 26/03/2018 - 21:36
Hi Sam

In the 2017 Autumn Statement the rules on SDLT were changed so that transfers between spouses of second property do no attract the Additional 3% SDLT. Accordingly, you could transfer up to £125,000 of mortgage consideration without paying SDLT. Your question has inspired me to write a new article about that, which will appear in our Newsletter within the next day or so. The link to the new policy is below.

https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-minor-amendments/stamp-duty-land-tax-higher-rates-minor-amendments

If you are seriously considering incorporation please book a consultation with me. It costs £400 and comes with a guarantee of total satisfaction or a full refund. Please see the link below.

https://www.property118.com/book-a-consultation/

Dependent upon how you are running your business you may already be deemed in law to be a partnership. I will explain further if/when you book a consultation.

Sam

19:56 PM, 27th March 2018
About 9 months ago

Reply to the comment left by Mark Alexander at 27/03/2018 - 07:50
Thanks Mark, I will arrange an appointment soon but first I need to add my wife to this property.
I reached out to HMRC and below is the response from them and based on that I think that £125K without SDTL is not an option. I will have to pay SDTL at 3% up till £125K and then 5% up till £250K.

Transfers between spouses are usually exempt from the higher rates of SDLT although such transfers are usually liable to SDLT at the standard rates. Examples include straightforward transfers from one spouse to answer, say a whole BTL; and transfers of part of, say, a holiday home; and transfers where the arrangement results in both spouses acquiring a new interest in property formerly owned by only one spouse.
The only substantial restriction is that relief does not apply where there is more than one buyer [one of whom is not as spouse] or more than one seller [one of whom is not a spouse]. For example, relief would not be allowed where an interest owned by a wife and her otherwise unrelated business partner is transferred to her husband.

Let me know if i understood this incorrectly.
Thanks.

Mark Alexander

22:36 PM, 27th March 2018
About 9 months ago

Reply to the comment left by Sam at 27/03/2018 - 19:56
.

Whoever you spoke to at HMRC has provided you with incorrect guidance I'm afraid.

Please see my article linked below which in turn links to the new Policy since the Autumn Budget 2017.

https://www.property118.com/new-sdlt-rules-can-help-smaller-landlords/

The additional 3% rate of Stamp Duty doesn't apply to transfers between spouses.

Stephanie Pooley

6:09 AM, 25th October 2018
About 2 months ago

If you set up a partnership and it is dormant in year one as you continue to trade as a sole trader do you have to submit tax partnership return and self assessment for yourself and partner ?

Stephanie Pooley

6:13 AM, 25th October 2018
About 2 months ago

Is it possible to set up a partnership with a colleague and split the profits without the partner owning the properties if you than submit partnership tax return with your self assessment

Mark Alexander

8:46 AM, 25th October 2018
About 2 months ago

Reply to the comment left by Stephanie Pooley at 25/10/2018 - 06:13
Hi Stephanie

Yes, a Partnership return would be required even if the partnership did nothing.

In answer to your second question; it depends. What would be the business of the partnership?

Stephanie Pooley

8:53 AM, 25th October 2018
About 2 months ago

Reply to the comment left by Mark Alexander at 25/10/2018 - 08:46
Thank you the business would be property lettings. On the partnership return I would just put zero in all the figures would I ?

Mark Alexander

9:15 AM, 25th October 2018
About 2 months ago

Reply to the comment left by Stephanie Pooley at 25/10/2018 - 08:53
I think you need to read HMRC manual PIM1030 before deciding whether you have a business partnership or not. Please see the link below.

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030

I do not deal with tax returns so I'm not the best person to advise you in that regard. I have an accountant for that and recommend you to do the same.

Stephanie Pooley

15:15 PM, 25th October 2018
About 2 months ago

Reply to the comment left by Mark Alexander at 25/10/2018 - 09:15
Thanks I have already read that link and in fact paid the extra to access your guide on forming a partnership but these were the questions I had. The accounts I have spoken to seem to not specialise answer these questions either

Mark Alexander

15:21 PM, 25th October 2018
About 2 months ago

Reply to the comment left by Stephanie Pooley at 25/10/2018 - 15:15
Maybe you would like to book a tax consultation with me and I will refer you to a specialist accountant thereafter?

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