Partnerships
As can be seen from the 'Starting Up In Business'
section of our web site, newly-formed self-employed people must
register as being so with the Inland Revenue as soon as is possible,
before they are fined. Due to the stresses and strains of being
self-employed, people in the past in such a situation asked for
an easier system for calculating and paying tax. For that reason,
Self Assessment was introduced, the key features of which are as
follows:
- Assessment is based on the current year;
- A sole point of contact is provided for queries;
- Fixed and automatic penalties charged for lateness; and
- Clearly described obligations for record keeping.
The most important aspect of Self Assessment is the first point
above - that of current year assessment. In the past, tax assessments
were based upon trading profits from the previous year, and this
involved complicated rules at the start and finish of the business.
Tax is now calculated on the profits arising in the tax year itself.
If your accounting period is different from the tax year, then tax
will be calculated on the profit arising in the 12 month accounting
period ending in the tax year.
Partnerships are different from standard employed
people in that they get their own Self Assessment tax return (form
SA800), with supplementary pages being available for the different
levels of income of the partnership. These tax returns also requires
details of profit allocations in force for the accounting periods
covered by the return. Such Self Assessment forms are sent by the
Inland Revenue to the 'nominated partner', which is the partner
who has been nominated by the other members of the partnership to
complete the return.
Until recently there was no legal requirement to keep records for
income tax, although Customs & Excise require registered traders
to keep records for VAT. However, we have always advised businesses
that it is in their own interests to keep all the records needed
to help prepare accounts and tax returns. Rules introduced in the
1994 Finance Act mean that you now need to keep all appropriate
records.
To highlight the hard work involved in keeping the Inland Revenue
satisfied, you are expected to do the following:
- Record/retain all sales/other business receipts as soon as you
have them;
- Keep back-up records (invoices, bank statements and pay-in slips)
to show where the income has come from;
- Record all purchases/other expenses as they happen, and ensure
(unless the amounts are very small) that you keep the invoices
for them;
- Keep records of all purchases/sales of assets used;
- Record all amounts taken out of the business bank account, or
in cash, for you/your family's personal use; and
- Record all amounts paid into the business from personal funds,
e.g. the proceeds of a life assurance policy.
All of these records must be retained for five years. With Academy
Accounting Ltd's help, all of the above large tasks can be taken
away from you, as we would be the ones doing the hard work. This
would leave you free to increase your sales, thus improving your
business. We would enter all such information into a new electronic
accountancy system, solely for your partnership, and would keep
it up-to-date. For more information, call us today on 0141 891 5999
or e-mail us at enquiry@academyaccounting.co.uk.
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