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VAT implications when a partner starts a new business

CG
Posts: 154
Joined: Wed Aug 06, 2008 3:33 pm

VAT implications when a partner starts a new business

Postby CG » Wed Jan 11, 2017 6:43 pm

If one member of a partnership, that is registered for VAT, wants to start up a new trade as a sole trader what are the VAT implications?

The new sole trader business would be one of illustration. The partnership produces silk screened stationery.

Can the sole trader trade without having to charge VAT?

Many thanks for any help.

spidersong
Posts: 342
Joined: Wed Aug 06, 2008 4:05 pm

Re: VAT implications when a partner starts a new business

Postby spidersong » Thu Jan 12, 2017 12:37 pm

If they're truly a sole trader then there are no implications for the partnership in VAT terms. However you have to be sure there's proper separation between the businesses, if HMRC find that the two businesses are using the same resources e.g. sharing staff, premises, banking arrangements, supplying the same clients or cross sourcing clients etc. then they may form the opinion that there is in reality only one business and seek to amalgamate the two.

The fact that the trades aren't too similar makes it easier to demonstrate that there are two businesses run by separate entities, but do be careful, and if the partnership does sell anything to the sole proprietor then make it as arms length as possible (and remember to charge VAT to the Sole Prop as appropriate).

les35
Posts: 445
Joined: Wed Aug 06, 2008 3:09 pm

Re: VAT implications when a partner starts a new business

Postby les35 » Thu Jan 12, 2017 6:28 pm

If you are interested, this is HMRC's manual of guidance on the issue of disaggregation.


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