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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can the profit share shown on partnership accounts be altered

Resolved Question:

Can the profit share shown on partnership accounts be altered on the partnership tax return whilst leaving the accounts unchanged. eg 50/50 on the accounts and 60/40 on the return to produce a lower overall liability if one partner does not pay class 4 NI for example
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

If you leave the profit split in the accounts unchanged as compared to the partnership tax return itself, it may come to light if the tax office conduct an enquiry into the return and they ask to see the accounts. It is unlikely but it is a possibility. If it were me, I'd adjust the accounts.

In the past, the profit split was supposed to be set out in a partnership agreement in advance of the accounting period which the tax office could ask to see but many husband and wife partnerships don't have a formal partnership agreement. HMRC don't like post year end manipulation of profit shares but I haven't seen them look into one for this type of thing for many years. Some partnership agreements I've seen allow for post year end profit splitting.

I hope this helps but let me know if you have any further questions.
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