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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
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Returns: partnership returns: introduction

Overview

There is no partnership liability in SA, but there is a partnership return to allow partnership matters to be dealt with centrally. Individual partners are required to include their share of any partnership profits in their own returns. The share of profits they enter in their own returns must correspond with the allocations shown in the partnership return. The comparison is carried out automatically except for accounting periods or trades not captured.

Although partners are individually responsible for the tax due on their share of partnership profits all matters relating to the calculation of those profits, and to the allocation of profits between partners, is dealt with through the partnership return.

Note: The maximum number of partner records that can be linked to a partnership within SA is 999.

Whilst the principal use of the partnership return is for compliance purposes, the return is submitted to the office with processing responsibility for capture of the return information. Returns are captured in full.

The return must

  • Be electronically filed, or be on the HMRC paper form, or be a computer generated version which is identical to the official HMRC form.
  • Be signed by the correct person, including a person acting in any capacity
  • Include all supplementary pages indicated on the return as being necessary. Note: A spreadsheet, table or list providing details which should be on separate supplementary pages (multiple trades or accounting periods) is not acceptable

Limited Liability Partnerships

A Limited Liability Partnership (LLP) provides the organisational flexibility of a partnership with the benefit of limited liability for its members. LLPs would normally be taxed as companies because in commercial law they are bodies corporate. However, special tax rules ensure that, in general

  • LLPs are treated as partnerships rather than as corporate bodies

And

  • The income and gains of LLPs are normally taxed on their members as if they were partners in an ordinary partnership

A Limited Liability Partnership (LLP) will be set up in SA with a partnership record unless

  • The LLP is not carrying on a commercial business, for example clubs and societies

Or

  • The LLP is in liquidation. Note: An ITSA return will be required for the period up to the date of liquidation, a Company Tax return will be required for the post liquidation period

It is therefore important that you notify the CT section in any of the above circumstances, so that a CT file and COTAX record can be set up.

For further information, see the COTAX Manual at business area ‘Case Records’, section ‘Setting Up Case Records’, subject ‘Limited Liability Partnerships’.

Return receipt

On receipt of the return the date of receipt must be stamped on the return and recorded (logged) on the partnership record using function LOG RETURN. Where bar code reading equipment is available this should be used to log returns as it is quick and accurate.

A return should be logged in the office in which it is received, provided that office has the LOG RETURN function available on Local Data Capture (LDC). The return must then be sent as soon as possible to the current office with processing responsibility.

Following the initial review of the return, clerical checks are required before capture to

  • Identify any changes to the partnership details and update the records accordingly
  • Consider whether any action is required immediately, for example, to deal with correspondence received with the return
  • Identify unsatisfactory returns

Unsatisfactory returns received before the filing date which are sent back on or after 10 October (or within 21 days before any other filing date), should be unlogged whilst the return is sent back to the nominated partner or agent who submitted it regarding omissions.

Where an agent is acting, a letter should also be issued to the other party notifying them of the action taken. If, in a case where an agent is acting, it is not possible to tell who submitted the return, it should be sent back to the nominated partner, see subject ‘Maintain Taxpayer Record: Nominated Partner’ (SAM101290), as it is their ultimate responsibility to ensure that a satisfactory return is submitted.

If the information is not supplied within 21 days, automatic penalties will apply.

Notes: 

1. Unsatisfactory returns received on 1 November should not be treated in the same way as those received in the period 10 to 31 October. This is to correspond with the fact that since October 2011, a return received on that date is considered to be late and will attract a penalty
   
2. Where the return has been received prior to the filing date but is being returned as unsatisfactory within 21 days before the filing date, a period of 21 days is given to allow a satisfactory return to be submitted. A period longer than 21 days should be allowed in certain exceptional circumstances, for example overseas addresses or UK geographical areas where there are known longer postal times

Return capture

Notes: 

1. It is important that you capture all relevant entries on the return as fully as possible and do not omit figures from return boxes simply because the system will allow you to do so. This is because, even where a box does not affect the calculation of the liability, the information is used for statistical, compliance and other purposes. Also, what you capture on the system needs to provide as complete a picture as possible for other staff to view.
   
2. Where a return has not been identified as an ‘Away’ return at the pre-capture stage, the return should be fully captured in the office of receipt. After full capture (including repairs), the return should be redirected to the responsible office and an SA Note made to record the action taken. On receipt in the responsible office, the return should be passed directly for 2nd day actions that may be required before being allocated a batch number and stored.

The partnership return is captured in full. The information is captured under Process Now and any enquiries dealt with under Check Later.

As details are entered the computer makes checks, identifies errors and gives warnings where unlikely situations arise. Some clerical reviews are necessary, for example, to deal with correspondence received with the return and to repair obvious errors or mistakes on the return.

Where it is found that a partnership return needs a repair it is important that corresponding changes are also made to the individual partners’ returns. Where a partnership return is repaired a notification of the repair must be sent to the partnership and to each individual partner’s office with processing responsibility, so that a revision notice detailing the repair(s) can be issued to the partner. It is therefore recommended that partnership returns and any associated partners’ returns which come in together are kept together.

It is possible to store a return if only partially captured in LDC where further information is required. However, it is important to clear these cases as quickly as possible as they are only held in LDC for a short period of time before they are deleted. The weekly paper report, ‘LDC Returns to be deleted list’, gives a minimum 7 day warning of all partially captured returns which will be deleted from the LDC server if they are not fully captured.

A paper report of returns held on LDC can also be obtained for management purposes by using the LDC Administrator function REQUEST LDC LIST. Other paper reports are produced to help manage returns in LDC.

Following full capture of the return

  • Information is passed to the main computer for

    • Processing of the return information (SAM122225), and
    • Updating of the partnership record
  • Clerical checks will be required to

    • Ensure that all partnership income has been accounted for by the partners

Notes: 

1. Some partnerships may submit more than one set of Standard Accounts Information. Where this occurs, in general, only the SAI for the business with the largest turnover, or where there is a single business, the latest period will be captured
   
2. Partnerships with an annual turnover of less than £15,000 will not have to complete the SAI. They need only complete the three line accounts information on the return
3. Partnerships with a turnover of £15 million or more and CT partnerships are not required to complete SAI. Instead they must submit full accounts and computations. In these cases only the receipt of the return will be logged and the relevant return details captured. For more information see subject ‘Partnerships: Turnover £15 million or more’ (SAM122220)

Filing online

Partnership returns can also be submitted over the Internet. The maximum number of partner statements that can be filed online for a single partnership tax return is 999. Partnership returns will go straight to the mainframe system with no clerical involvement. They will be subject to the same computer checks (validation) as returns captured in Local Data Capture (LDC) and will not be accepted unless they pass all validation.