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Where Taxpayers and Advisers Meet

Sole Trader and Partnership: VAT Query

Pirate0
Posts:1
Joined:Sun May 21, 2017 3:43 pm
Sole Trader and Partnership: VAT Query

Postby Pirate0 » Sun May 21, 2017 3:45 pm

Hi,

I run an eBay business and turnover around 70-80k per year. I am a sole trader. I do my own tax return. All very simple and it works well.

I have an opportunity to buy a hairdressing salon - my partner cuts hair and would be in partnership with me, 50/50.

The salon, over recent years, has operated within a few thousand pounds of VAT registration but hasn't triggered it and isn't registered for it.

VAT registration would kill my eBay business. It would make the salon uncompetitive too, looking at figures.

Can I run my eBay business as a sole trader and the salon as a partnership, without registering either for VAT (unless they hit the 85k threshold individually)? Can I keep them separate for VAT and tax purposes?

This is vital to me as if I have to aggregate the two turnovers, I'd be well over it and wouldn't buy the salon.

Also, I learned all about tax for my business and don't use an accountant. I will produce accounts for the salon myself. Is it a similar process to fill in a tax return for a partnership?



Thank you

spidersong
Posts:352
Joined:Wed Aug 06, 2008 4:05 pm

Re: Sole Trader and Partnership: VAT Query

Postby spidersong » Mon May 22, 2017 2:48 pm

Partnerships have some additional pages and you need to allocate profits to individuals to go in their tax returns beyond that on the direct tax side I'm not your man.

On the VAT side so long as there are not significant organisational, economic, or financial links then you should be fine. VAT looks at a taxable person, and any separate legal entity is a separate taxable person unless HMRC can prove the links are so close that it's essentially one business. So it's avoiding one business paying expenses for both and then sorting it out later, it's making sure you're not using the same bank account, or supplier accounts, no swapping staff between the two, trying to avoid sharing premises unless there's an arms length rent etc. etc.

But they're presumably vastly different trades, with different customer bases, and different staff operating in different ways, so it should be fairly simple to keep it separate and avoid registration.


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