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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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If my drawings from business are more than the net profit

Resolved Question:

If my drawings from business are more than the net profit what should I be declaring to the revenue
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

Is the business a limited company or a sole tradership?

Customer: replied 1 year ago.
It's a partnership
Expert:  TonyTax replied 1 year ago.

Thanks.

Each of the partners is taxed on their share of the trading profit regardless of drawings so you should report the income and expenses which will give you the profit. Clearly, there may be capital allowances to claim. Take a look here for more information on drawings and profit.

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

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Sorry if I am being daft but do I claim my drawings or just the profit?
Expert:  TonyTax replied 1 year ago.

You ignore the drawings. You work out the profit (income less expenses ignoring drawings) and divide it between you and your partner. Unless you lent put cash to the business before you started it and are now repaying that loan to yourself, if you keep drawing out more than you make in profit, you will be overdrawn at the bank. By drawing out more than you make, you are effectively borrowing profit you have yet to make and may never make.