Partnerships

Question 1

Steps to tax a partnership?

Answer 1

Adjust the profits
Deduct capital allowances
Split profits between partners
Assess each partner on profits using basis rules

Question 2

How do you allocate partnership profits?

Answer 2

Allocate salary
Allocate interest on capital
Allocate remainder with profit sharing ratio

Question 3

How do you deal with a mid year change in profit allocation? How may it arise?

Answer 3

Time apportion salary/interest on capital/profit and split the periods of changes
Arises due to:
Change of profit agreement
New partner joining 
Partner leaving

Question 4

Basis periods for partners
On going?
New partner?
Leaving partner?

Answer 4

On going - Current year basis
New partner - opening year rules
Leaving partner - closing year rules

Question 5

What happens if a partnership makes a profit but due to salary and interest on capital 1 partner makes a loss?

Answer 5

The loss making partner is deemed to make nil profit and the loss is redistributed to the other partners in proportion of the profits initially made by them!

Question 6

What happens if a partnership makes a loss but due to salary and interest on capital 1 partner makes a profit?

Answer 6

The profit making partner is deemed to make nil profit and the profit is redistributed to the other partners in proportion of the losses initially made by them!

Question 7

What is the difference of a partnership and a limited liability partnership (LLP)?

Answer 7

LLP limited to amount of capital introduced by each partner

Salaried members of an LLP are treated as an employee for the purposes of NI/IT/CT