Like most businesses, if you operate a general partnership you’ll need to register with HMRC. Partnerships are a bit different to some businesses though, because as well as registering the partnership itself as an entity, each partner will also need to register.
A partnership is a type of business structure which allows a group of people and organisations to work together whilst sharing all of the responsibility. Partners can be individuals, companies, other partnerships, or even a combination. In that respect, setting up a partnership can be particularly useful for a group of businesses that want to collaborate on something.
How do I set up a business partnership?
Anyone can set up a partnership, and it’s fairly straightforward to do. The partnership must appoint a ‘nominated partner’ who is responsible for the partnership’s record keeping, as well as any paperwork or forms. They’ll also be responsible for registering the partnership with HMRC.
Registering a partnership with HMRC
You can register a partnership online using a Government Gateway ID to sign in to the online service. If you already have one for a different business, it’s usually a good idea to create a separate Gateway account for the partnership to avoid any mix-ups! If you can’t register online, you can use an SA400 form to register through the post instead.
You’ll need to confirm:
The partnership’s name (either your own names or one that you choose)
The nominated partner
The nature of the business
A business address
The details of each partner
When do I need to register the partnership?
To avoid any penalties, the nominated partner must register the partnership before 5th October in the business’s second tax year.
The partnership started in February 2023, so its first tax year was 2022/23 (6th April 2022 to 5th April 2023).
This means its second tax year is 2023/24 (6th April 2023 to 5th April 2024), so the partnership must register with HMRC before 5th October 2023.
Any individual partners must also register by the same deadline.
Do the partners register separately in a partnership?
Yes. As well as registering the partnership itself, each partner must register with HMRC too. Even if they’re already somewhere on HMRC’s books, they’ll need to confirm that they’re also now a partner in this particular partnership. They’ll each be responsible for their own tax returns and paying their own tax and National Insurance.
The UTR number identifies the partnership’s tax records in its own right and will be different to the UTR for any partners, so keep it safe! The nominated partner (or your accountant if you use one) will need this to submit Self Assessment tax returns for the partnership.
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Paying tax in a partnership
Even though partnerships must submit Self Assessment tax returns as an entity, they don’t actually pay tax on the profits that they make. Instead, each partner will pay tax based on their share of the profits.
It’s not mandatory, but it’s a very good idea! The partners in the partnership can draw up a legally binding document called a deed, which sets out the rights, responsibilities, and duties of each partner. This can include how the partnership should be run, as well as how to share any profits.
What are the partners responsible for?
All of the partners have a responsibility to make sure that the partnership meets its mandatory reporting requirements (such as tax returns) on time, even if they’re not the nominated partner.
For everything else, partners normally share the running of the business, together with any profits or losses made by the partnership. However, this may depend on the type of partner, and whether they have drawn up a ‘deed of partnership’.
General partners usually share all responsibilities of a partnership business, including investment in the business, management, and profits and losses, but their personal assets may be at risk if anything goes wrong.
Partners who are limited are only responsible for debt which is equal to the amount of their initial investment or less
A sleeping partner will make an investment into the business and will usually take a share of any profits, but doesn’t have a say in the running of the partnership.