This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Is this two separate businesses?

Jensfilms
Posts:2
Joined:Wed Dec 15, 2021 3:05 am
Is this two separate businesses?

Postby Jensfilms » Wed Dec 15, 2021 3:12 am

Hey. I am looking for some advice. My wife is a photographer and she specialises in newborn photography and wedding photography. I work full time but would sometimes second shoot with her at weddings but not take any payment.
I am planning on leaving my full time employment and starting up a wedding film company. She will offer my services to her couples if they are looking for a wedding videographer but I will invoice them from my business and it will go into my bank account. Also now that I will be no longer working full time I will start to invoice her for any second shooting work I do.
We will both be sole traders. My question is will this be seen as two separate businesses in regards to VAT or one business. They are both wedding related but very different services are being offered. Many thanks in advance for any advice

robbob
Posts:3210
Joined:Wed Aug 06, 2008 4:01 pm

Re: Is this two separate businesses?

Postby robbob » Wed Dec 15, 2021 10:12 am

There definately is potential for this falling under the artificial separation rules - you will not get any certainty as to whether you could get clobbered by the vat office or not - there have been many random decisisions in this regard over the years so each case would be judged on its own merits and may basically end up being a case of heads you win tails you lose if you end up going to a tribunal that agrees 51% with the other side.

Deffo mworth extensive reading of the following chapters.

Note the fcat that this may be an area where you could be targetted doesnt mean you would be targetted.

The main ethos is that the more the entitities are separate and indepent the less chance you have of being clobbered here. Certainly by syphoning income off from her to you that is soemwhat questionable - but not exactly unusual that some businesses say this is what we do and thats what they do and they will bill you direct.

https://www.gov.uk/hmrc-internal-manuals/vat-single-entity-and-disaggregation-manual
https://www.gov.uk/hmrc-internal-manuals/vat-single-entity-and-disaggregation-manual/vatdsag08250

Note you will only really need to worry here if combined turnover (including value of reverse charge supplies you pay out for - eg google and facebook ads) of both sntities would push you over the vat threshold or if one does voluntary registration.

If i had to guess - cas long as you run each buisness completely independently and along genuine commercial terms along the lines that would be opearted if your wife was to use other third "subcontractors" for specific outsourcing roles you will probably be fine.
If there is any element of your syphoning or splitting sales away from the original intended business purely for vat advantage OR there is any shared use of assets or financial funtions i would suggest that you may not be ok - or if their is any confusion who customers are engaging at the outset or at any stage in the process.

pawncob
Posts:4879
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Is this two separate businesses?

Postby pawncob » Wed Dec 15, 2021 10:40 am

I agree with robbob. Any video work, as a distinct service, would be fine, but "second shoots" is questionable.
With a pinch of salt take what I say, but don't exceed your RDA

les35
Posts:625
Joined:Wed Aug 06, 2008 3:09 pm

Re: Is this two separate businesses?

Postby les35 » Wed Dec 15, 2021 12:10 pm

I am more cautious. Since you are likely to have clients in common, that is a key factor in HMRC arguing for a single business. If the result of you maintaining two business is a reduction in VAT compared to having a single business, a further test is satisfied.
And, if HMRC do target you and issue a formal Notice of Aggregation, the threshold to successfully appeal is very high as you have to demonstrate that HMRC were 'unreasonable' in taking the view they have.
At the moment, HMRC have other priorities, so I would be surprised if you were to be targeted just now.
You should make a decision, perhaps based on this thread, and advice from your Accountant.

Jensfilms
Posts:2
Joined:Wed Dec 15, 2021 3:05 am

Re: Is this two separate businesses?

Postby Jensfilms » Wed Dec 15, 2021 3:19 pm

Guys thanks for coming back to me. I might just leave the second shooting then but definitely continue the video as a separate business. Although we will have some of the same clients we will also have our own separate clients. I will make sure everything is separated

It’s just not worth being VAT registered as we don’t really purchase anything and don’t want to be passing the cost onto our couples

Wonder would it be worth while being partners in the photography aspect of the business and then I’m the sole worker for the video. Maybe for the partnership she takes 75% and I take 25%


Return to “VAT & Excise Duties”

cron