What is a partnership tax return? The essential guide to the SA800 tax return

Running a business with another person as a business partnership involves various responsibilities to comply with UK tax rules.

A Partnership Tax Return (SA800) is one responsibility to be completed by all UK business partnerships and sent to HMRC each year. A Partnership Tax Return summarises all the relevant financial information for the business partnership including income and expenses incurred.

Read our blog below to find out more about reporting to HMRC and completing a Partnership Tax Return.

What is a Partnership Tax Return?

If you run a business partnership with another individual, then you are required by law to complete and submit a Partnership Tax Return (Form SA800) to HMRC for each tax year.

The Partnership Tax return is normally eight pages long and is used to declare income from the partnership trade and professions it carries out, and interest or alternative finance receipts from banks, building societies or deposit takers for tax purposes.

In addition to the standard SA800, supplementary pages may be required to cover the less common types of income and disposals of chargeable assets.

Who needs to file a Partnership Tax Return?

ALL partnerships in the UK are required to file a Partnership Tax Return per tax year. This includes the following types of partnerships:

• General partnerships - These are where two or more individual partners operate a business for profit. General partners are responsible for running all aspects of the business and have unlimited personal liability for the partnership’s debts and obligations, with no restrictions to the amount invested in the business.
• Limited Liability Partnerships (LLPs) - A LLP is a separate legal entity distinct from its members/partners, therefore limiting personal liability and protecting the assets of individuals (i.e. personal assets) from business debts. An LLP is a type of hybrid entity, adopting many characteristics of a limited company and a general partnership.
• Limited partnerships - Within a limited partnership business responsibility is shared among partners. Limited partners are not personally liable for the debts of the business. They are not held liable beyond the amount they contribute to the business.

Partnership Tax Return vs Personal Tax Return

A Partnership Tax Return must be submitted by the partnership as a whole covering all the income, expenditure, profit or losses that the partnership makes. Whether your partnership is a profit making or non-profit partnership, you still are required to submit a Partnership Tax Return. One nominated partner is required to handle the partnership’s tax returns.

A personal tax return (self-assessment tax return) on the other hand is required to be submitted by each individual partner to report their share of the partnership profits and other income they may earn during a tax year. Individuals are responsible for their own self-assessment tax return each year.

How much tax do partnerships pay?

Partnerships income is not actually taxed directly (unlike Limited Companies that pay Corporation Tax). All income earnt by a partnership must be shared between the partners and the partners are taxed on the share of the profits that they are allocated (as stated in the partnership agreement) via their self- assessment tax return.

Therefore, the partners as individuals are taxed in line with current income tax rates (i.e. basic rate, higher and additional tax rates) depending on their level of income.

When should I file a Partnership Tax Return?

The nominated partner responsible for filing the Partnership Tax Return needs to ensure it is submitted by the deadline date required by the UK tax regulations. This deadline date for an online Partnership Tax Return is 31st January. If your partnership is submitting a paper Partnership Tax Return, then the deadline date to submit your completed form is 31st October.

As with all types of tax returns, you need to ensure you submit the SA800 Partnership Tax Return by midnight of the deadline date or before to ensure you meet your tax liabilities and you avoid late filing penalties, interest or legal action by HMRC.

What information do I need to include in a Partnership Tax Return?

As with all tax returns, a Partnership Tax Return involves detailed and accurate financial information about your partnership business. Below are details of the financial information required on Partnership Tax Returns:

• Partnership income: You should record income from sales of products or services, other income (for example UK property income) and any interest or investment income the partnership may have made (i.e. interest from partnership savings accounts etc).
  If the partnership carries out more than one trade, then income from all trades should be included or if the partnership earns foreign income, then this should also be included on the completed form.
• Partnership expenses: You should have detailed records, invoices and receipts of all your allowable expenses for the tax return period. This should include overhead costs and operational costs. For example, cost of stock, raw materials, products, salary costs, property costs, marketing, etc.
• Capital allowances: Capital allowances can reduce your tax bill and the tax you pay on assets the partnership owns. So you should detail any expenditure incurred on captial assets that your partnership own or lease.
• Interest and charges: If your partnership has incurred any interest or charges during the tax year (for example, loan interest) this needs to be detailed on the tax return.
• Losses: Losses can be offset against profits in other periods. Therefore, if your partnership incurred losses during the financial period, these should be detailed to reduce your tax liability.
• Capital gains: If your partnership owns business assets and they disposed of them during the tax year for which you are reporting, then these may be subject to capital gains tax on any gains made on the disposal of those assets, so must be detailed on the tax return.
• Partnership statement: The Partnership Tax Return includes a short Partnership Statement for summarising the partnership’s profits, losses or income allocated to the partners. This information should be provided to each partnerfor the individuals to fill in their personal tax returns.

Keeping accurate records

As with all information sent to HMRC, you are required to keep accurate financial records and the latest, up-to-date evidence for your partnership tax return. HMRC may ask for proof of all partnership income, expenses, captial purchases and investments.

How does the information on the Partnership Tax Return affect my self-assessment?

You need to use the profit allocation figures contained in the Partnership Statement to fill in your self-assessment tax return, and this figure cannot be altered or changed from what is stated on the Partnership Tax Return.

Seek professional advice

Tax can be extremely complicated, and you should seek advice from a qualified tax professional to ensure you complete your Partnership Tax Return correctly. A professional tax adviser can help to save you and your partner’s tax.

Here at dns accountants, our professional tax team, have years of experience dealing with Partnership Tax Returns and can help you to minimise the tax the individual partners pay. Call us today on 03300 886 686 or email on enquiry@dnsaccountants.co.uk.

About the author

Siddharth Agarwal
I am a Chartered Tax Advisor (OMB) and ACCA. I have 9+ years of experience in owner-managed business taxation issues, company reorganisations, property taxation, and succession planning. I also work with private clients on bespoke tax planning strategies for trusts, residence status, and non-residents. I aim to fulfil my professional duties towards my clients and keep them satisfied, my utmost priority. I believe in establishing and maintaining businesses and personal relationships as the key to mutual growth.