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HMRC internal manual

Enquiry Manual

From
HM Revenue & Customs
Updated
, see all updates

Contract Settlements: Letters of Offer: Detail - Partnerships Example

The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.

The offer from the partnership will include

  • tax, including higher rate tax, on partnership profits, and
  • Class 4 NIC chargeable on the partnership.

The offer from each individual partner will include

  • tax on personal income, including partnership investment income, and
  • capital gains tax, including tax on partnership gains, and
  • Class 4 NIC not chargeable on the partnership.

Example

  • Mrs A and Mrs B were in a partnership from May 1988.
  • Mr A and Mr B became partners in September 1993.
  • Mr A retired in June 1995. A continuation election is made.
  • The investigation established omissions of

    • trading profits from May 1988 to 5 April 2000
    • property income from Mr A and Mr B for the same period
    • a chargeable gain by Mrs B in June 1994.

Seven separate offers are requires, as follows

·           Mrs A and Mrs B for 1988/89 to 1993/94 (September 1993)  
   
·           Mrs A, Mrs B, Mr A and Mr B for 1993/94 (September 1993) to 1995/96 (June 1995)  
·           Mrs A, Mrs B and Mr B for 1995/96 (June 1995) and 1996/97  
·           Mr A on property income for 1988/89 to 1999/2000  
·           Mr B on property income for 1988/89 to 1999/2000
  partnership share for 1997/98 to 1999/2000
·           Mrs A on partnership share for 1997/98 to 1999/2000  
·           Mrs B on partnership share for 1997/98 to 1999/2000
  chargeable gain for 1994/95