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.
