Partnerships and VAT
Partnerships and VAT

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Partnerships and VAT
  • Whether a partnership exists
  • Registration
  • VAT liability of partners
  • Transactions between partners and partnerships

A general partnership is treated, for VAT purposes, as though it were a separate taxable person.

This note is about:

  1. the nature of a partnership, and why this may be particularly important in a VAT context

  2. how a general partnership, limited partnership and limited liability partnership (LLP) should register for VAT

  3. the extent to which partners are liable for VAT owed by the partnership

  4. the VAT implications of dealings between the partners and the partnership, and particularly:

    1. transferring assets in or out of the partnership, and

    2. transferring interests in the partnership itself

This note does not consider Scottish partnerships.

Whether a partnership exists

The question of whether a partnership exists may be a matter of dispute with HMRC, as this may determine whether a business should have been registered for VAT, and whether VAT has been underpaid.

Whether a partnership exists depends on the facts, and not on what the taxpayers say or believe. Any contractual provision to the effect that no partnership exists will carry little weight.

The crucial issue will be whether the persons in question are carrying on a business in common with a view of profit. For more information on what constitutes a partnership, see Practice Note: The nature of a general partnership and its legal framework.

In the Wild case, a husband and wife carried on a business in