If you become a partner in a business partnership, you’ll need to let HMRC know using an SA401 form so that you can pay the right amount of tax and National Insurance on your share of any profits. The partnership itself must also register for Self Assessment. We explain who can be a partner in a general partnership, and what you need to do to register correctly.

Who can be a partner?

The partners in a business partnership can be individuals, or even entities such as another partnership or a limited company. Unlike limited companies which need at least one individual person to be a company director, a partnership can consist entirely of partners which are corporate entities.

What information will I need when I register as a partner?

You’ll need to provide information about the partnership along with your own details as a partner. The partnership must register itself as an entity for Self Assessment, and will receive its own Unique Taxpayer Reference (UTR) number from HMRC. The process for registering a partner depends on whether you’re an individual, or registering as a corporate entity (such as another partnership).

Registering as an individual partner using an SA401 form

Each individual partner will need to complete an SA401 form to register as a partner for Self Assessment. You’ll receive your own Unique Taxpayer Reference (UTR) number from HMRC, which will be different to the UTR for the partnership. So don’t mix them up!

 
If you already have a UTR number from a previous registration for Self Assessment (for example, because you also work as a sole trader) you should include it on the SA401 form. This helps HMRC to link your tax affairs and make sure that your tax bill is accurate.

Registering another entity as a partner using an SA402 form

Partners which are an entity, such as another partnership or a company, must complete an SA402 form to register as a partner in a partnership for Self Assessment.

One person within the organisation will act as a point of contact. For example, a partnership will have a nominated partner, and this person takes responsibility for completing and submitting information to HMRC on time. It’s their duty to register their partnership as a partner in another partnership.

Appointing an agent

If you have an agent acting on your behalf, such as an accountant, you’ll need to authorise HMRC to deal with them in relation to your role as a partner, even if you’ve already given authorisation for other areas. This only deals with the person acting for you. If the partnership also has as an agent, you’ll need to authorise this separately.

What if I leave a partnership, or the partnership ends?

A partner who leaves a partnership still needs to submit a tax return for that year, up until the date they left. If the partnership itself ends, the tax return is completed for the period of trading up until the date the partnership ended.
 

Submitting tax returns in a partnership

The partnership doesn’t actually pay tax as an entity, but the nominated partner will complete and submit a Self Assessment tax return for the business.

Each partner will also need to complete and submit their own tax return, and will pay tax on their share of the profits.

The type of tax return that you send depends on your business structure, but essentially the income figures you put down on the tax return will include your share of the partnership’s profits.

For example, an individual partner will need to submit a Self Assessment tax return and pay Income Tax. A partner that is a limited company will record its share of the partnership’s profits on the Company Tax Return and pay Corporation Tax on it.

Each partner should receive a copy of the partnership’s financial records to help them complete their own tax return accurately.

Should I sign a partnership agreement?

A partnership agreement is a legal document which states the responsibilities of each partner so everyone understands their role and duties. It will also show the amount of capital raised by each partner, and their entitlement to a share of any profits.

Having a partnership agreement isn’t a legal requirement, but it can be invaluable to have one in place, particularly if a partner leaves or if someone in the business dies, or there are other areas of potential confusion.

For instance, some partnerships might have a ‘sleeping partner’ who contributes capital (and takes a share of the profits as a result) but doesn’t share the daily management.

What am I responsible for as a partner?

Unlike a limited company which is separate to its owners, and even though partnerships must register as an entity for tax returns, a partnership isn’t legally distinct from its partners.

This means that each partner, including ‘sleeping’ partners, share equal responsibility for the partnership and any debts or liabilities.

Although the nominated partner is responsible for submitting the partnership’s tax return, the partners have a duty to support this, and will be responsible for any penalties that the partnership receives.

 
Learn more about our online accounting services for partnerships and partners. Call 020 3355 4047 to chat to the team, and get an instant online quote.