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Where Taxpayers and Advisers Meet

Vat threshold partnership or not

Steveg1985
Posts:6
Joined:Thu Dec 07, 2017 2:05 pm
Vat threshold partnership or not

Postby Steveg1985 » Sun Sep 15, 2019 4:54 pm

I’m looking for advice on vat thresholds.

Me and my wife are about to finish university and we’re considering going self employed we would be conducting the same trade.

I originally got the idea of a partnership as she hates paperwork and as a partnership I thought I could deal with it all for her.

Obviously I’m thinking long term here but my concern is if I ever hit the vat threshold any profits would be wiped out.

As a partnership we would only have a vat threshold of 85000 but as two separate sole traders we would have a vat threshold of twice that. We could easily share clients if one of us got close.

If we started a partnership and then later downgraded to sole trader I’m almost certain this would be illegal and evasion however if I tax plan now and foresee this issue and setup as two sole traders would we be better off?

Thanks

les35
Posts:635
Joined:Wed Aug 06, 2008 3:09 pm

Re: Vat threshold partnership or not

Postby les35 » Mon Sep 16, 2019 10:02 am

This is a situation where you should sit down with your Accountant and a calculator!
If you start as a partnership and then split to two sole traders to avoid VAT registration you will make yourselves vulnerable to HMRC challenge. They would regard such an action as artificial separation.
I am concerned when you say that your business would not be sustainable if you registered for VAT. As you start up you should assume VAT registration from the start and plan accordingly.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Vat threshold partnership or not

Postby pawncob » Mon Sep 16, 2019 12:28 pm

Start ( and continue) as two sole traders. You can still do her book-keeping!
With a pinch of salt take what I say, but don't exceed your RDA


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