Sole trader/Ltd company/vat question
Discussion
I have a little private hire company which at the moment I operate as a vat registered sole trader, although I'm in the process of making it into a Ltd company.
I'm considering entering into a partnership with my mate buying and selling vehicles, he is also a sole trader at the moment but not vat registered. My question is that up until the point where we need to register for vat is that going to cause me a problem? I mean I will have one vat registered company and one not?
I hope that makes some kind of sense!
I'm considering entering into a partnership with my mate buying and selling vehicles, he is also a sole trader at the moment but not vat registered. My question is that up until the point where we need to register for vat is that going to cause me a problem? I mean I will have one vat registered company and one not?
I hope that makes some kind of sense!
Is that info correct?
If I’m understanding the original post, you are personally registered for VAT as you are a sole trader (so not a company) with your trade listed as Private Hire.
If you then do the car work (with friend) in the form of the car business (quite similar) then you are simply widening your scope of work, you are still not trading as a limited company so it is still you trading as you in the eyes of HMRC.
It’s a tricky area and I may well be wrong but I’d certainly be having a conversation with your accountant about it.
If you are going to transfer your current work to a Ltd company then shouldn’t be an issue.
For what it’s worth, my tupence of advise would be if you’re going into partnership with anyone, friend or otherwise, make it Ltd.
There are thousands of tales of one friend/partner shafting another leaving them with massive debts. If it’s a limited company then it’s going to be a lot easier to walk away with the shirt on your back if it does turn bad.
Business and friends are uncomfortable bedfellows.
If I’m understanding the original post, you are personally registered for VAT as you are a sole trader (so not a company) with your trade listed as Private Hire.
If you then do the car work (with friend) in the form of the car business (quite similar) then you are simply widening your scope of work, you are still not trading as a limited company so it is still you trading as you in the eyes of HMRC.
It’s a tricky area and I may well be wrong but I’d certainly be having a conversation with your accountant about it.
If you are going to transfer your current work to a Ltd company then shouldn’t be an issue.
For what it’s worth, my tupence of advise would be if you’re going into partnership with anyone, friend or otherwise, make it Ltd.
There are thousands of tales of one friend/partner shafting another leaving them with massive debts. If it’s a limited company then it’s going to be a lot easier to walk away with the shirt on your back if it does turn bad.
Business and friends are uncomfortable bedfellows.
Edited by Nick928 on Saturday 17th March 20:08
Nick928 said:
Is that info correct?
If I’m understanding the original post, you are personally registered for VAT as you are a sole trader (so not a company) with your trade listed as Private Hire.
If you then do the car work (with friend) in the form of the car business (quite similar) then you are simply widening your scope of work, you are still not trading as a limited company so it is still you trading as you in the eyes of HMRC.
I’d argue that running a taxi business and running a car sales business are two completely different businesses. The only similarity (afaics) is that they involve cars.If I’m understanding the original post, you are personally registered for VAT as you are a sole trader (so not a company) with your trade listed as Private Hire.
If you then do the car work (with friend) in the form of the car business (quite similar) then you are simply widening your scope of work, you are still not trading as a limited company so it is still you trading as you in the eyes of HMRC.
The sole trader / LtdCo question is irrelevant to the VAT question. They are two separate issues. A person can have as many businesses as he likes and each one of them can be any combination of sole trader/partnership/LtdCo/plc
I'd be with Countdown on this - they are sufficiently separate in nature. I would not be selling (or buying) any of the ex-private hire cars through the 'dealership' though, even at arms length - you just don't need the potential hassle for the limited benefit even if strictly following the rules it would be allowable.
Doesn't answer the very real and practical question of the issues of going into business with a friend - this is just re the tax question.
Doesn't answer the very real and practical question of the issues of going into business with a friend - this is just re the tax question.
I once tried to hire a Kung Fu instructor for a few hours per week, self employed.
His day job was as a tradesman of some sort, operating as a vat registered sole trader.
He tried to charge me VAT on top of our agreed hourly rate and when questioned he insisted that his accountant and HMRC had said he must.
I don't know whether what he said was correct as I switched to another guy immediately.
Be interested to hear the final outcome on this.
His day job was as a tradesman of some sort, operating as a vat registered sole trader.
He tried to charge me VAT on top of our agreed hourly rate and when questioned he insisted that his accountant and HMRC had said he must.
I don't know whether what he said was correct as I switched to another guy immediately.
Be interested to hear the final outcome on this.
He was correct to charge you VAT.
If an individual has to charge VAT because of one trading activity, if he conducts another separate trading activity, because he is already VAT registered, he must charge VAT on that second activity.
What he should have done is operate the other activity through a separate entity, such as a partnership or through a limited company.
If an individual has to charge VAT because of one trading activity, if he conducts another separate trading activity, because he is already VAT registered, he must charge VAT on that second activity.
What he should have done is operate the other activity through a separate entity, such as a partnership or through a limited company.
Eric Mc said:
He was correct to charge you VAT.
If an individual has to charge VAT because of one trading activity, if he conducts another separate trading activity, because he is already VAT registered, he must charge VAT on that second activity.
What he should have done is operate the other activity through a separate entity, such as a partnership or through a limited company.
Thanks Eric.If an individual has to charge VAT because of one trading activity, if he conducts another separate trading activity, because he is already VAT registered, he must charge VAT on that second activity.
What he should have done is operate the other activity through a separate entity, such as a partnership or through a limited company.
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