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

Two sole traders sharing a brand but keeping finances separate

victoria123
Posts:1
Joined:Wed Jan 08, 2020 7:32 pm
Two sole traders sharing a brand but keeping finances separate

Postby victoria123 » Wed Jan 08, 2020 7:59 pm

Hello All,

My main question is, can two sole traders submit separate tax returns and avoid registering as a partnership if we keep clients and income/costs separate and only share a website to promote ourselves?

If so, how is best two do this?

BACKGROUND

I've set up a brand/website for my self-employed business (marketing and design consultancy), which I have been doing for over 4 years. My brother wants to get into the same industry, so I've offered that we can use my brand/website/ social media accounts to promote our work in a shared portfolio and propose that we describe ourselves as a marketing duo.

We will not have a joint bank account, payments will be made into our separate sole trader accounts
We will take on the projects individually and as such invoice the clients separately. Contracts will be between each sole trader and client too.

I currently pay all the mutual costs, including website hosting, design packages, domain names etc. Would I be able to invoice my brother on a monthly basis to cover these costs? I assume then all other business costs as in travel etc would be down to us separately and each of our responsibility to include in our individual tax returns.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Two sole traders sharing a brand but keeping finances separate

Postby robbob » Thu Jan 09, 2020 9:02 am

This sounds more a legal issues than anything else - it is vital your customers know who they are dealing with and that really needs to be clear and transparent. I am sure what you want to be done can be achieved via some reasonably simple planning. Albeit it may be better to use one entity if the main goal is for customer to not know who they are engaging to do the work.

Have you not thought of using a single limited company with class A and class B shares so you can extract profits according to an agreed formula?
If you wanted to go the whole hog you could have a separate entity holding the branding if you wanted.
This seems like the simplest option to me if its one shopfront.

Either that or a franchise type setup where you both use similar branding but it is obvious which business the clients are engaging legally when they sign on the dotted line. It's absolutely fine for one to pay costs and bill the other in such an arrangement.

Note you have to think through the vat issues too as there could potentially be some leakage here or scope for minimising unnecessary vat due. Note the vat office may take the view (and they may be wrong or right!) that two separate businesses should be treated as one if it looks like the Major reason for the split is to avoid paying vat and the business has strong financial links.

I guess the final possibility is for your brother simply to provide subcontracting services to your business as long as the arrangement passes the employment status tool checker - it is possible that everything could go through you and he would simply extract his fee for services provided.

pawncob
Posts:5089
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Two sole traders sharing a brand but keeping finances separate

Postby pawncob » Thu Jan 09, 2020 12:58 pm

There's no partnership, you're just sharing advertising costs. Invoice him for the costs incurred.
With a pinch of salt take what I say, but don't exceed your RDA


Return to “Income Tax”