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Freds Friends
May 7, 2022
Solved

Hi there, can somebody please help me with how I categorise mine

  • May 7, 2022
  • 2 replies
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My partner then sends me an invoice for her share of the clients payments which varies each month then I pay her from the business bank account
Best answer by paul72

Thanks for the extra information @Freds Friends 

 

OK - I'll try to work through it (then at the end tell you that, yes you probably should be looking at an official partnership!).

The way you are currently working is this:

  • you are the business
  • you invoice clients - that's your income as though you're self-employed
  • your partner invoices you for her share - in effect she's a supplier to your business so you need to enter these into QBO as Bills & categorise as Cost of Sales or similar
  • (from her point of view, those half-share invoices are her income but she has no expenses)
  • any money taken from the business account by you (or your partner's own account by her) should be treated as Drawings - essentially an advance on Earnings after Tax has been paid

 

It's a technical point but the (slight) danger with working like this is that HMRC could say that your friend/partner is not actually self-employed but should be regarded as your employee.

 

If you were to form a Partnership, there would be a clear definition for HMRC to show that you are working together as a business with equal risk & reward.

Your partner would then not invoice for her share - both parties would take money as Drawings.

 

If this is a long-term operation (& something that may grow) it may be worth discussing with an accountant to see whether a Partnership or Limited Company would be more beneficial in terms of tax.

(unless you're bending the rules and/or earning £000s per week there's probably not much in it & the rules around Partnerships are much simpler)

 

Hope this helps.

2 replies

paul72
paul72
May 7, 2022

Hi @Freds Friends 

Need a bit more detail.  At the moment, there's not much to go on without guessing.

 

What exactly are you trying to categorise & where?

Are you & your partner an official Partnership (or limited company) - or are you simply two self-employed people working together?

F
Freds FriendsAuthor
May 7, 2022
Hi there Paul, thanks so much currently we are both self-employed working together but am thinking we may need to become an official partnership for HMRC accounting purposes, yes? 
 
With regards to categorising in QuickBooks.. which category do I use for the transfer of our salaries out from the business account?  Cost of Sales or ???
 
Also my partner invoices me, do I have to manually add this to QB to offset against the payment to my partner & what catagory would I use for this invoice too please?
 
Thanks for your time & help… Mandy
 
A
AbegailS_
May 7, 2022

Hi there, @Freds Friends,
 

Can you tell us more about the issue you're having with our online help? You can also share the details of your concern below and I'll surely get back to you as soon as possible with the best solution. 

 

You can check this reference on what accounts are best to use in categorizing transactions: Categorise transactions in QuickBooks Online

 

If you have other questions, I'll be happy to answer them for you. Just leave a comment below and I'll take a look at it. Have a great rest of the day.


 

F
Freds FriendsAuthor
May 7, 2022
Thank you...  basically, 2 of us job-share we are both self-employed working together but I am thinking we may need to become an official partnership for HMRC accounting purposes, yes? 
 
With regards to categorising in QuickBooks.. I invoice all the clients for both of our work but I am unsure which category I use for the transfer of our salaries out from my business account?  Cost of Sales or ???  I obviously need my partners salary showing separate from mine.  She sends me an invoice to make her payment, do I need to manually add this to Quickbooks?  If so, what category should i use for this too?
 
Thanks for your help.
paul72
paul72Answer
May 9, 2022

Thanks for the extra information @Freds Friends 

 

OK - I'll try to work through it (then at the end tell you that, yes you probably should be looking at an official partnership!).

The way you are currently working is this:

  • you are the business
  • you invoice clients - that's your income as though you're self-employed
  • your partner invoices you for her share - in effect she's a supplier to your business so you need to enter these into QBO as Bills & categorise as Cost of Sales or similar
  • (from her point of view, those half-share invoices are her income but she has no expenses)
  • any money taken from the business account by you (or your partner's own account by her) should be treated as Drawings - essentially an advance on Earnings after Tax has been paid

 

It's a technical point but the (slight) danger with working like this is that HMRC could say that your friend/partner is not actually self-employed but should be regarded as your employee.

 

If you were to form a Partnership, there would be a clear definition for HMRC to show that you are working together as a business with equal risk & reward.

Your partner would then not invoice for her share - both parties would take money as Drawings.

 

If this is a long-term operation (& something that may grow) it may be worth discussing with an accountant to see whether a Partnership or Limited Company would be more beneficial in terms of tax.

(unless you're bending the rules and/or earning £000s per week there's probably not much in it & the rules around Partnerships are much simpler)

 

Hope this helps.

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