setting up a second business advice.
setting up a second business advice.
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JeffC

Original Poster:

1,837 posts

242 months

Friday 6th September 2019
quotequote all
Just a quick one chaps.

I am a director of a Ltd co that is vat registered, registered at my home address .

I am looking into another venture and wondering how would be the best way to run it, Its on and off in the same trade as my Ltd co but providing a service rather than in sales.

The new venture will also be run from the home address but will have a low turn over expected to be circa £25-£30k, 95% of the turn over I would expect to be profit.

would it be better to run this in effect as a sole trader with its own set of accounts separate from my main business and If so would it be exempt from Vat or as I am a director of the ltd co that is Vat registered would I then need to charge vat on services, The later option wouldn't be an issues as potential customers are vat registered themselves.

If I invoice it through the LTD co and charge vat and pay monies into the business account would that incur the same tax liabilities as running it on its own ? I am presuming If I pay it into the Ltd co I will then automatically pay corporation tax on the profits at the year end and then personal tax when I take it as wages. If I set it away on its own, is that then the same ie the business is taxed on the money it has made and I pay again when I draw it out.




Frimley111R

19,299 posts

264 months

Friday 6th September 2019
quotequote all
JeffC said:
a low turn over expected to be circa £25-£30k, 95% of the turn over I would expect to be profit.
Do more of this!! Sod anything else.

anonymous-user

84 months

Friday 6th September 2019
quotequote all
Have a look here to decide if you are sure you can convince HMRC that your treatment of the VAT is correct

https://www.gov.uk/hmrc-internal-manuals/vat-singl...

you can run the basic numbers on sole trader income tax liability easily enough

the impact it has on your & your ltd's overall situation is also fairly easy to work out, but not from the numbers you have provided

if, for instance, you have £20k profit from the sole trader side, will that be in addition to the money you take from the ltd, or will you reduce your own drawings from the ltd (and if so for how long and to what end)

does the new business benefit from operating under limited liability? will customers expect / prefer to deal with a ltd & / or vat registered entity

many questions, none of which is hard to answer, just needs a bit of thinking

overall I'd be surprised (but only a tiny bit) if it isn't better to bang it all through the ltd

JeffC

Original Poster:

1,837 posts

242 months

Friday 6th September 2019
quotequote all
Frimley111R said:
JeffC said:
a low turn over expected to be circa £25-£30k, 95% of the turn over I would expect to be profit.
Do more of this!! Sod anything else.
its my labour and lack of expenditure that makes the profit % so high, the more I do on this job would then distract me from my main business .


JPJPJP said:
Have a look here to decide if you are sure you can convince HMRC that your treatment of the VAT is correct

https://www.gov.uk/hmrc-internal-manuals/vat-singl...

you can run the basic numbers on sole trader income tax liability easily enough

the impact it has on your & your ltd's overall situation is also fairly easy to work out, but not from the numbers you have provided

if, for instance, you have £20k profit from the sole trader side, will that be in addition to the money you take from the ltd, or will you reduce your own drawings from the ltd (and if so for how long and to what end)

does the new business benefit from operating under limited liability? will customers expect / prefer to deal with a ltd & / or vat registered entity

many questions, none of which is hard to answer, just needs a bit of thinking

overall I'd be surprised (but only a tiny bit) if it isn't better to bang it all through the ltd
The second business wouldn't really benefit from being Ltd unless it was better financially and most of the customers I have lined up know me and are vat registered, I would imagine that jobs I would do for Joe public would prefer it not be vat'd though.

financially I take a smaller wage from the ltd co at the mo along with a dividend. so my tax allowance is already eaten up, whatever the second business makes I was going to take as an extra income and pay tax how ever is the most economical to do so.

wheelerc

228 posts

172 months

Friday 6th September 2019
quotequote all
Have a read of https://www.crunch.co.uk/knowledge/tax/vat-disaggr...

Not registering the second entity for VAT would looks very suspicious to HMRC.

What are the reasons against running everything through the current Ltd co?

JeffC

Original Poster:

1,837 posts

242 months

Saturday 7th September 2019
quotequote all
wheelerc said:
Have a read of https://www.crunch.co.uk/knowledge/tax/vat-disaggr...

Not registering the second entity for VAT would looks very suspicious to HMRC.

What are the reasons against running everything through the current Ltd co?
It is prob the easiest way to do it I just wasn't sure if it would be more efficient to let it stand on its own two feet.

Eric Mc

125,757 posts

295 months

Saturday 7th September 2019
quotequote all
In my experience with clients, if a person is running a business (doesn't matter whether it is a sole trader, partnership or limited company) and decides to start a second business, before too long they get themselves into all sorts of a muddle - especially if they are operating as a "one man band" without a dedicated in-house accounting or admin team. It is so easy to start mixing transactions between the two entities and before you know it, you have lost control of the situation.

In many ways, the simple solution is to carry on the new activity as just another strand of what you are already doing - especially if it has a fairly close relationship with the original activity.


JeffC

Original Poster:

1,837 posts

242 months

Saturday 7th September 2019
quotequote all
Eric Mc said:
In my experience with clients, if a person is running a business (doesn't matter whether it is a sole trader, partnership or limited company) and decides to start a second business, before too long they get themselves into all sorts of a muddle - especially if they are operating as a "one man band" without a dedicated in-house accounting or admin team. It is so easy to start mixing transactions between the two entities and before you know it, you have lost control of the situation.

In many ways, the simple solution is to carry on the new activity as just another strand of what you are already doing - especially if it has a fairly close relationship with the original activity.
If there is no benefit of doing it separate that is sounding like the easiest way going forward.

fridaypassion

11,457 posts

258 months

Sunday 8th September 2019
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Assuming you are using up all your tax allowances there's no more efficient way than in a LTD

MrSparks

654 posts

150 months

Monday 9th September 2019
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Last year I started an app and registered it in a separate vat registered ltd company.

I seriously wish I just left it in my existing vat registered ltd company.

Life would be so much easier!

I would suggest start it in your existing ltd, you can always move it to a separate entity later down the line if you need to.