Chapter DMBM530130

Published date29 April 2016
Record NumberDMBM530130

Partner leaves partnership

Partner joining partnership

Recovery against the correct partners

Persons registered for VAT in partnership may be individuals, partnerships or companies. Section 9 of the Partnership Act 1890, provides:

“Every partner in a firm is liable jointly with the other partners, and in Scotland severally also, for all debts and obligations of the firm incurred while he is a partner; and after his death his estate is also severally liable in a due court of administration for such debts and obligations, so far as they remain unsatisfied, but subject in England or Ireland to the prior payment of his separate debts.”

In relation to a partnership debt, the recovery action we choose and where the partnership is registered (England, Wales, Northern Ireland or Scotland) will determine the entity we pursue for the debt (see DMBM585150, and also for Scotland only, DMBM670230 and DMBM680230).

We may take recovery action against:

  • the partnership (as an unregistered company) or
  • any number of the solvent partners who are liable with the partnership for the debt (or part of it) or,
  • both the partnership (as an unregistered company) and any number of the solvent partners, in concurrent proceedings (at the same time), such as in insolvency proceedings.

Those we take action against cannot appeal our choice, and we are not required to explain our choice. Payment of the debt by one of the partners releases all the others. Questions of who contributes what may be settled afterwards between the partners themselves. In the unlikely event of an overpayment, as a result of one or more partners paying the debt, the overpayment may be repaid pro-rata to those who made payment.

If you are taking recovery action against more than one partner at the same time such as in concurrent insolvency proceedings, all action should be suspended where one party (e.g. a partner) challenges the debt (e.g. applies for the statutory demand to be set-aside or appeals to tribunal).

Partner leaves partnership

Where a partnership continues to trade but a partner ceases to be a member of the partnership, his liability for partnership VAT debts continues until the date on which we receive notification of the change in the membership (s.45 (2) of the VAT Act 1994) (not on the day he left).

But, if the partnership stops trading when the partner leaves, we calculate the partner’s liability to the date the partnership ceased to trade.

If necessary, we will calculate any partner’s...

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