EM6356 - 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 required, 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