Partnership & VAT Threshold

[OasisGardening]

My business has now been operating for circa 18 months as a partnership during which time we have been VAT registered.

My understanding has been that the VAT threshold is based at a business level i.e if the trading of the partnership overall goes over £73k / £77k then we must be VAT registered.

However, this weekend a friend told me that his wife was advised to set her business up as a Limited Liability Partnership (LLP) and the VAT threshold for the LLP is based upon the number of partners i.e each individual partner has their own VAT threshold so for example if an LLP has 10 partners, the VAT threshold for the business is £770k.

Is this correct? If so, is the fact that it is an LLP rather than a standard partnership make a difference or have I been registered for (and therefore paying) VAT unnecessarily?

Thanks

 

[David Griffiths]

Is this correct?

No, it's nonsense!

 

[algobusinesssupport]

No, it's nonsense!

Actually David, they are correct. In an LLP the partners are each responsible for the own taxes. It is the person, not the business, who is registered for VAT.

Ref: hmrc.gov.uk/vat/start/register/groups.htm

 

[David Griffiths]

Actually David, they are correct. In an LLP the partners are each responsible for the own taxes. It is the person, not the business, who is registered for VAT.

Ref: hmrc.gov.uk/vat/start/register/groups.htm

The partners are responsible for their own income taxes. The partnership remains liable to be registered for VAT if it goes over the threshold.

The link that you provided refers mainly to groups of companies and joint ventures. A partnership or an LLP is neither. In fact, the same link states that a VAT registered person can be a partnership or LLP.

It is nonsense.

 

[algobusinesssupport]

The partners are responsible for their own income taxes. The partnership remains liable to be registered for VAT if it goes over the threshold.

The link that you provided refers mainly to groups of companies and joint ventures. A partnership or an LLP is neither. In fact, the same link states that a VAT registered person can be a partnership or LLP.

It is nonsense.

HMRC Clearley states and on that link also "related companies or limited liability partnerships can register as a single taxable person"

"It is the person, not the business, who is registered for VAT. A person can be either an individual or a legal person or entity. A registered person might be:
a sole proprietor
a partnership or limited liability partnership
a company
a club
an association
a charity
any other organisation or group of people acting together under a particular name, such as an educational or health institution, exhibition, conference, etc
Each VAT registration covers all the business activities of the registered person."

 

[faradaykeynes]

NO, i think thats wrong perception and David is right, article talk about Group, division or joint venture VAT registration and here LLP is treated as a single party to group or joint venture. Normally joint venture are temporary arrangement there fore each parties generate income at different level therefore it is not right to treat JV whole turnover as guide to vat threshold. Lets say you are LLP (4 partners) and you are in JV with 2 other companies, you share in JV is say 10k in term of turn over and other 2 companies sharing 100k each, over all JV turnover would be 210k, both other 2 companies have to vat register but not you if your income from LLP is below 77k

 

[David Griffiths]

HMRC Clearley states and on that link also "related companies or limited liability partnerships can register as a single taxable person"

"

And how does that relate to the OP's question?

 

[algobusinesssupport]

And how does that relate to the OP's question?

Now read the rest of it...

 

[David Griffiths]

Now read the rest of it...

The bit that a registered person can be an LLP? In other words that it's the LLP that's registered not the individual partners?

Or some other bit that you are misnterpreting? You'll have to enlighten me.

 

[elaine@cheapaccounting]

I do not need to say that David is right about the vat threshold.

Of course, anyone can get advice from any where on accounting and tax matters - so they can of course ignore David's correct advice given.

 

[elaine@cheapaccounting]

To add

Who can register for VAT

You can register for VAT if you're in business and you are one of these:

• an individual
• a partnership
• a company
• a club
• an association
• a charity
• any other organisation or group of people acting together under a particular name, such as an educational or health institution, exhibition, conference, etc

For VAT purposes, the individual or organisation that is in business is known as a 'taxable person'.


As listed - a partnership is a taxable person.


Source:


http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm

 

[talkinpeace]

Oasis - David and Elaine are right.
Glad to hear things are still going well.

 

[OasisGardening]

So if I'm understanding correctly...

The VAT threshold is £77k for all - irrespective of whether it is an LLP or a standard partnership and irrespective of how many partners are involved.

Correct?

 

[faradaykeynes]

Correct, 77k is for an entity, either ltd co, llp or sole trader and it is based on UK turnover ONLY, you don't need to take into account your sales outside UK for 77k vat threshold