I help with the books of a partnership. It's a family business. I was having a conversation with one of the partners (the wife) about Self Assessment tax returns. She said her previous accountant told her that they were taxed on what ever profits were left in the company but I was under the impression they would be taxed on their drawings.
Any input on this would be appreciated. Eventually I want to venture in to Self Assessments a bit more.
The previous accountant is correct. Partners are taxed on their share of the (tax adjusted) profits made by the partnership. Their drawings are ignored for these purposes.
This is in contrast to owner managed companies. A company pays corporation tax on its (tax adjusted) profits but the director/shareholder is only liable to personal tax on the funds that they withdraw from the company (through, for example, salary or dividends).
__________________
Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Thanks for that. Yes I remember this now. I've never done a self assessment for a partnership, nor would I attempt one until I felt confident and ready to do so. I do want to start doing small company accounts and venture more in to self assessments eventually. For now I will stick to bookkeeping and some CIS self assessments. I'm fine and dandy with those at the moment. I work full time so only do these bits in the evenings and weekends.
