Postby spidersong » Mon Feb 12, 2018 10:36 am
Artificial Separation is where something that is essentially one business splits into separate entities in order to avoid VAT registration i.e. a single ebay business operating through two sole traders. HMRC will treat businesses with substantial financial, organisational, and economic links as one business especially where they operate within similar fields or customer bases.
So if you're selling men's shoes, your wife sells ladies shoes and you're both using the same suppliers, both using ebay, use the same phone number, warehouse (backroom?), same computer/network then HMRC will look at that and say 'hold on, you're really just one business selling shoes on ebay'.
However if you sell shoes online, but your wife sells consumer electronics and you have different employees (if any), different customer bases, different bank accounts, books, phone lines, suppliers, don't work on each others businesses and don't cross support each other in different ways such as shared purchase of stationary/accountants/packaging etc. then HMRC will treat two different businesses as two different businesses.
So your initial post doesn't really give enough information, but as a default HMRC will probably say that two individuals operating out of the same residential address as ebay traders are likely to be a single partnership and substantially linked with each other.