Profits from partnerships
HMRC will calculate an individual’s share of a partnership’s profits after adjustments, by combining any losses brought forward from previous years with the amount shown as ‘your total share of the total taxable profits from the partnership’s business’ on their tax return.
Paper short return
Trading profit after allowance business expenses is displayed on a tax return as ‘profit’.
Trading profit where the trading allowance has been claimed
Example
2016 to 2017 2017 to 2018 2018 to 2019
Trading income
£21,000
£26,000
£16,000
Trading allowance claimed 0
£1,000
£1,000
Trading profit
£21,000
£25,000
£15,000
Trading profit where there is more than one trade in the same tax year
HMRC will combine all profits and deduct any losses for all those trades to establish trading profit.
Example
2018 to 2019
Trade 1 profit £60,000 Trade 2 loss £20,000 Trading profit £40,000
Where an individual has traded for all three tax years
To calculate average trading profit, HMRC will combine all profits and losses for all three tax years that somebody has had continuous trade, and then divide by three.
Example
2016 to 2017 2017 to 2018 2018 to 2019 Average trading profit for the 3 tax years
Trading profit or loss £60,000
£60,000
£30,000 loss £30,000
Where an individual has continuous periods of self-employment for two tax years
To establish the average trading profit, HMRC will combine all profits and losses for the two tax years and divide by two.
Example
2016 to 2017 2017 to 2018 2018 to 2019 Average trading profit for the 2 tax years
Trading profit or loss Did not trade £25,000
£45,000
£35,000
Where an individual has traded in two tax years, but not continuously
HMRC will calculate average trading profit based solely on the tax year 2018-19, even if an individual was self- employed in tax year 2016-17.
Example
2016 to 2017 2017 to 2018 2018 to 2019 Trading profit
Trading profit or loss £25,000
Did not trade £45,000
£45,000
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
Page 86 of 590
Made with FlippingBook - Online magazine maker