What about a Partnership?

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    What about a Partnership?

    I’ve read many posts about apportioning rental income, but it’s still not clear to me. I did this after my current accountant suggested that I start a partnership with my wife, to reduce some income tax. However she seemed to be very flaky on the subject, not knowing any more than I did about it. After 3 meetings, I’ve decided to no longer use her.

    I called HMRC, and they too, confirmed they were not specialists in this subject. My god, who do you turn too? The info they gave out on the phone (after 40 mins on hold) contradicted what is on the HMRC website. She couldn’t comment when I pointed that out and didn’t know which was right either.

    I spoke to another well-known and trusted accountant about what I wanted to do. She seemed to know this area well, but suggested against it, as the business was just a return on investment and I wasn’t actually trading. She said creating a partnership could attract other deductions/contributions.

    I guess DoT is one option, but I am interested in knowing if anybody has any experience or comments of using a Partnership?

    Until a few days ago, my initial reaction was that it would not be a partnership within the terms of the Partnership Act 1890.

    However, having reviewed the matter more closely for a married couple , I have changed my stance somewhat.

    IMHO, it is possible IN THEORY. And HMRC agree that it is a possibility.

    But most jointly owned properties are unlikely to qualify - especially if the rental business consists of a single property.


      Thanks. They are jointly owned, but there are five houses


        Most property rentals would not be classed as a trade - unlike a hotel or guest house.

        But some might be a "business" within the 1890 Act.

        If the partnership route is to be used (for England & Wales), you should have a written partnership agreement and have checked out the legal implications also.

        A Partnership Tax Return will have to be filed with HMRC


          Partnerships for married couples can be effective.

          They allow the proportions of ownership and income to be different, and these can be changed with greater simplicity than otherwise.

          As the partnership can't own property, the ownership needs to be sorted out first ( or in parallel) to avoid a mess where the partnership and (for example) tenancy in common ownership percentages conflict.

          You also need to be careful that you don't inadvertently mess up any CGT planning.

          HMRC don't like schemes that are complicated and designed simply to reduce tax paid. They can't really argue when what you're doing is simply to be tax efficient, but when you start getting clever, you might want to consider whether it's worth it. And ask what insurance/indemnity your accountant might give you if HMRC start querying something - because the accountancy and legal fees for a simple investigation (let's assume you're on the side of he angels 100%) could be much more than any previous "wins". There's a temptation to value "winning" against HMRC as worth something more than the actual financial gain.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


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