Buisness partnership

[tomm156]

Hi all.

 

currently selling firewood with a friend.

 

I am registered self employed as a sole trader and so is he. I am  also vat registered for the firewood.

 

currently he invoices me each year for half of the profits and keeps his own books and does his self assessment online and I do the same.

 

so we charge a customer 5% vat. I take the vat, then the invoices me for half of whats remaining after vat at the end of the year. he takes a copy of all the receipts that we have and we both keep a copy for our own books.

 

this seems a bit long winded and I was wondering if there was a way we could register for one set of accounts for us both and still split the profits. at the moment we do not want to use an accountant as it is only small scale. we are both also paye on out full time jobs.

 

I know the obvious answer is to ring hmrc but I wanted to read up before doing so,

 

thanks for taking the time to read this

 

Tomm

[Steve Bullman]

Explain further, you say he takes a copy

of the invoices, how does this work?  You are the one bat registered so it makes sense for you to solely have them.

 

goong limited is one way of making things equal, for that you will need an accountant thohfh unless you are well informed enough to do them yourself 

[tomm156]

I reclaim the vat but as he pays half of the invoice he takes a copy to claim as a business expense if that makes sense.

[SbTVF]

Any good accountant will save you money not cost you. We save a fortune because of our accountant.

[Steve Bullman]

Is he claiming half the net value on the invoice then?   Sounds messy to me 

[donnk]

There is no we. Its you as far as the tax man will be concerned.

 

Your mate is a subbie and you are paying him as such.

 

He can copy receipts for his own comfort but wont be able to use them. Just like I cant photocopy some Tesco supplier invoices and claim them as expenses. That would be fraud!

 

On the plus side for you, his 'share' for you is tax deductible as a business expense. For him its income and liable for tax. If this setup is going to be a longterm setup then an accountant would probably advise you make him a shareholder so he can receive his share as dividend which is much more tax efficient for him (not necessarily for you though).

 

If it were otherwise then you could send all the forum members copies of the receipts so we can all use them against our tax, we will all save a fortune and have plenty of time to think on what to spend it on while doing bird!!!

 

Edited October 3, 2017 by donnk

[Tomtop]

What your doing does sound legal to my if your both claiming for the same thing and you get all the vat. If your vat registered and he not. Why don’t you run the business and just pay him half the profit.

[benedmonds]

You don't need to be ltd, you could just have a partnership.  Just open a bank account in the business name and all in-goings and out -goings go through that.  You would need to keep some accounts and an accountant/book keeper would make life simpler..

 

The partnership would need to be VAT registered if you wanted to claim the VAT back. (Check out the flat rate scheme).  Tax would be paid on the partnerships profits via self assessment. You could go ltd at a later date as this gives you a bit of protection if things go pear shaped and there are some tax benefits, but if your turnover is small its not much and the additional accountancy fees would eat most of them.. 

 

The issues will be that partnerships can get complicated. They do have their advantages but you need to be able to trust your partner completely, you have to both want the same out of the business, both be willing to put the same (or equivalent)  into the  business. 

 

I have been running a business with a business partner for about 14 years now and it is not always easy... But having a business partner you can trust does have advantages and being able to share the work load is great..

[SamWhiting12]

As Ben has said, if you're not becoming a ltd company, then you need to register as a partnership on HMRC. At the end of the tax year you have to declare what you've made as part of the partnership and what split of the profit is going to each partner. That split then also gets recorded on your personnel end of year self assessment.

[tomm156]

thanks for all the advise, I think I wil go and have a word with an accountant and see what they say.

 

thanks