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HMRC internal manual

VAT Registration

The effects of death, insolvency and incapacity on registration: death of a partner: VAT treatment of changes in the constitution of a partnership

In normal partnership law:

  • a partnership is dissolved when one of the partners leaves, and
  • a new partnership is formed if those same individuals continue to trade in partnership.

This is known as a ‘technical dissolution’. The new partnership is a different partnership to the first and, under normal circumstances, the change would constitute a change of legal entity for VAT purposes, requiring either a VAT68 or deregistration and re-registration.

But the VAT Act 1994, section 45(1) provides that, once a partnership is registered, no account need be taken of any subsequent changes in the composition of the partnership. This applies equally whether the registration is in the name of the firm or in the name of the individual partners. Where a partnership is registered in the names of the individual partners, an amendment may need to be made to the register to add or delete the name of an incoming or outgoing partner as appropriate. The only practical action that needs to be taken in this situation is to make sure that:

  • where the partnership is registered in the names of the individual partners, the name is amended to take account of any changes
  • any new partners are included on the VAT2 and any former partners are removed from it.