Tax compliance question

[Paul Kelly ICHYB]

I have been involved in 3 - 2 were clear, the third, a major, industry changing VAT issue, resulted in selling the business to a competitor, who was also wrapped up in the issue!

 

[MyAccountantOnline]

I have been involved in 3 - 2 were clear, the third, a major, industry changing VAT issue, resulted in selling the business to a competitor, who was also wrapped up in the issue!

As an accountant working in practice for over 30 years I've dealt with a few more than that but lets not detract from this thread. The OP is now getting some professional advice and doing the right thing.

 

[DontAsk]

They don't. In the event of an investigation though this could get extremely messy hence the advice to sort it now.

How will anyone, let alone HMRC, know how the work is split, unless it's too much for one person, which I doubt given the t/o is only 35k/yr?

"Yes, my wife works really hard", end of that part of the investigation.

Just make sure she knows how to do everything if asked to demonstrate.

 

[DontAsk]

You stated She decides what money to draw down, and she transfers some to me for household use so the funds coming out of the business are clearly joint drawings.

The devil will be in the detail.

Is it transferred straight from the business account to hubby?

Once it's in her personal account, it's her money to do with as she pleases. She gives hubby some money for household expenses, so what? Thousands of couples do this.

 

[Ziggy2024]

How will anyone, let alone HMRC, know how the work is split, unless it's too much for one person, which I doubt given the t/o is only 35k/yr?

There isn't a split, that's the problem. The setup needs formalising as has already been advised.

"Yes, my wife works really hard", end of that part of the investigation.

HMRC may have it's faults but they are really not that naive. In an investigation HMRC would put forward an assessment based on their understanding of the facts and the taxpayers would have to prove this wasn't the reality of the situation. Based on what has already been said this would be difficult.

Just make sure she knows how to do everything if asked to demonstrate.

Or seek advice on how to structure the business properly.

 

[Paul Kelly ICHYB]

There isn't a split, that's the problem.

You are right - the wife does it all!

the taxpayers would have to prove this wasn't the reality of the situation.

So, if my wife starts a business and she gets a HMRC investigation, she has to prove that I am not part of the business? Repeat this hundreds of thousands of times across the UK.

Or seek advice on how to structure the business properly.

Why isn't it now?

Putting the OPs comments to one side, again, wife's ebay account, wife's bank account, wife's SA, wife's tax payments.

 

[Ziggy2024]

You are right - the wife does it all!

No she doesn't - this is the problem and is the crux of the question asked by the OP.

So, if my wife starts a business and she gets a HMRC investigation, she has to prove that I am not part of the business? Repeat this hundreds of thousands of times across the UK.

No, the facts of the scenario will determine how the business should be treated for tax purposes. Facts are always the key.

Why isn't it now?

Putting the OPs comments to one side, again, wife's ebay account, wife's bank account, wife's SA, wife's tax payments.

OP has confirmed it isn't, that's why. HMRC may never investigate the business but if they do they aren't as stupid as some people seem to think they are. Hence the OP is correct to be concerned.

 

[Paul Kelly ICHYB]

the facts of the scenario will determine how the business should be treated for tax purposes.

But HMRC do not know any facts yet......

 

[DontAsk]

There isn't a split, that's the problem. The setup needs formalising as has already been advised.

Read the Op. It's somewhere in the range 80:20 - 90:10 split.

HMRC may have it's faults but they are really not that naive. In an investigation HMRC would put forward an assessment based on their understanding of the facts

Which facts? The wife is running a business.

and the taxpayers would have to prove this wasn't the reality of the situation. Based on what has already been said this would be difficult.

What reality? Nothing has been said to HMRC. They have no "facts" or "reality" other than the wife is registered for self assessment as a sole trader.

 

[DontAsk]

OP has confirmed it isn't, that's why. HMRC may never investigate the business but if they do they aren't as stupid as some people seem to think they are. Hence the OP is correct to be concerned.

Again, read the OP. He has confirmed nothing other than that everything is in his wife's name, that he helps out and wife contributes to the household bills.

 

[Paul Kelly ICHYB]

What the OP says here, should there be a knock at the door, is irrelevent!

What his wife says (the husband doesn't need to be there) is what matters!

 

[Ziggy2024]

@DontAsk & @paul Kelly - do you really think on a general advice forum it is better to advise the OP not to worry about a potential issue or is it better to advise them to seek professional advice to make sure that issue doesn't bite them later down the line?

The facts laid out in the OP clearly show a potential partnership. The fact that you don't see that doesn't mean that it isn't true. And thinking that HMRC will just roll over and say "OK if you say it is all the wife's income then we will just go away" is delusional.

I should have followed Nicola and prevented the tangent! OP can decide how they wish but I hope they go for the accountant option.

 

[GLAbusiness]

Wife has the business and and does all the admin
OP does virtually all the operational work. This is not just helping out: it is total responsibility for the operations side of the business.

Question: How to structure arrangements to reflect the facts
Answer: Discuss with an accountant

A lot of comments on this thread have been recommending arrangements to obscure the facts

 

[Bob123456789]

Might be worth editing that bit!

Oh bloody hell typo, I can’t change it now

 

[Bob123456789]

Just to clear a couple of points up turn over is 30 odd but profit it’s more like 15k to 20k, money is drawn down to her personal account from the business then she transfers what she likes to the household funds. Either way like I said my original concern was that i was involved to much now as things have grown. A trip to an account will be able to advise me further. This has acted as a good start so I appreciate that. I will add to this post the accounts advice for info.

 

[Paul Kelly ICHYB]

is it better to advise them to seek professional advice to make sure that issue doesn't bite them later down the line?

I did that many posts ago!

Wife has the business and and does all the admin
OP does virtually all the operational work.

How does HMRC know this?

At the moment, it's just the OP, his wife, us post participants and the 200k other UKBF members! Let's keep it between us!

 

[GLAbusiness]

How does HMRC know this?

That's not the point. It's like saying embezzlement is OK so long as nobody knows I'm doing it

 

[Paul Kelly ICHYB]

It's like saying embezzlement is OK so long as nobody knows I'm doing it

It is not like saying that. It is a small business owner, who is not the OP, continuing to operate and pay taxes as they have previously done.

Well done to the OP for their honesty, but he is not a partner or an employee - he is a husband helping his wife.

 

[DontAsk]

How does HMRC know this?

That's not the point. It's like saying embezzlement is OK so long as nobody knows I'm doing it

The mistake is getting caught, LOL!

 

[Bob123456789]

I like to do the right thing not worrying for years about the letter landing at the door. Like I say we all have to pay tax I just want to get it right. If the accountant tells me it’s fine then we can continue as we are if not we can change the set up to stay compliant. I really do appreciate peoples time here.

 

[MyAccountantOnline]

@DontAsk & @paul Kelly - do you really think on a general advice forum it is better to advise the OP not to worry about a potential issue or is it better to advise them to seek professional advice to make sure that issue doesn't bite them later down the line?

The facts laid out in the OP clearly show a potential partnership. The fact that you don't see that doesn't mean that it isn't true. And thinking that HMRC will just roll over and say "OK if you say it is all the wife's income then we will just go away" is delusional.

I should have followed Nicola and prevented the tangent! OP can decide how they wish but I hope they go for the accountant option.

Just sometimes I feel like I'm banging my head on a very hard brick wall....need we say more