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HMRC internal manual

VAT Registration

Entity to be registered: partnerships: salaried partners

The question of whether a salaried partner is a full partner or simply an employee depends on the circumstances of the particular case. A salaried partner should be treated as an employee of the firm (and not included in the registration of the firm) if, despite being held out as a partner, we have information to show that he is paid either by a fixed salary or a share of the profits but is denied the rights and duties normally accorded to a full partner, that is to say, the obligation to contribute capital and to share losses and the right to fully participate in the management of the firm.

If a person, who is called a salaried partner, enjoys a share of the profits and an interest in the partnership capital, he should be treated as a full partner and included in the registration of the firm.

If notification on the VAT 1 and VAT 2 includes the name of a salaried partner, in the absence of any evidence to the contrary, you may accept that as evidence that the salaried partner is, in fact, a full partner on the basis that he is holding himself out as being a full or general partner (see VATREG08550 on Holding out).