2 businesses, same industry, slightly different. I want to split for VAT purposes, is this doable?

[mediaworld2025]

Hi all,

I'll try to keep this short.

I currently have 2 trading names for my business, which is a media business, I operate them under different names because they differ slightly, one is media related content for corporate / commercial purposes one is wedding media (both companies provide photos and video).

I voluntarily registered for VAT as my corporate side really benefits from this and all my clients also deal with VAT. My wedding side however is going to be a pain, saturation in the wedding media market is quite high, so I don't fancy putting my prices up 20%, I also don't fancy taking a big hit on pricing either. I kept it all under one business for mortgage reasons (I needed to show as much income as poss when applying as it was during covid and banks didn't like giving mortgages to self employed photographers!)

I've been planning to go LTD for a while now, is there any legal way to separate these businesses? I am planning to register both as LTD companies, both separate bank accounts, they would operate from the same premises (my home address, office in the garden) but I'm planning to buy some more camera equipment, so if I bought this equipment through the wedding LTD company, then I would actually use this equipment separately from my corporate side. I have separate websites, socials and emails, clients and customer base are completely separate, same with marketing. Corporate side would remain VAT registered.

I do try to genuinely operate these businesses as separate as possible but I'm concerned HMRC will see both as "Media related" and assume artificial dissegregation.

Thanks in advance!

 

[Bobbo]

Separate laptops for managing bookings / photo editing etc?

Separate subscriptions to photoshop or whatever software?

What happens when you're about to leave the house for a corporate job and realise you've forgotten to charge the 'corporate' camera but the 'weddings' camera is sitting there with a full battery?

 

[mediaworld2025]

Separate laptops for managing bookings / photo editing etc?

Separate subscriptions to photoshop or whatever software?

What happens when you're about to leave the house for a corporate job and realise you've forgotten to charge the 'corporate' camera but the 'weddings' camera is sitting there with a full battery?

Separate laptops, no but can be if that makes a difference.

Separate subscriptions, no, is different software necessary or is that nitpicking on smaller details?

If I'm about to leave for a corporate job and haven't charged my batteries then I wouldn't be very good at my job, if it helps I have about 15 individual batteries.

 

[Newchodge]

Separate laptops, no but can be if that makes a difference.

Separate subscriptions, no, is different software necessary or is that nitpicking on smaller details?

If I'm about to leave for a corporate job and haven't charged my batteries then I wouldn't be very good at my job, if it helps I have about 15 individual batteries.

You already don't have separation:

Separate laptops, no but can be if that makes a difference.

Separate subscriptions, no, is different software necessary or is that nitpicking on smaller details?

Clear evidence it is one business.

Changing these factors in order to separate is evidence that they are not separate.

 

[boxlot]

As far I know the same person can't have 2 similar businesses one not registered for VAT and other VAT registered. IR wont like it. You should speak with your accountant first.

Regarding equipment, no one will check which equipment you're using for which business.

 

[Mark T Jones]

Regarding equipment, no one will check which equipment you're using for which business.

They definitely will check, if they choose to investigate.

 

[WaveJumper]

You can always try but and its a big BUTif looked at in detail by HMRC things could unravel pretty quick. What does your accountant think?

Statement of Practice 4 (1983)

www.gov.uk

 

[ecommerce84]

My thinking is that if you have to ask if the businesses would qualify as being separate then they probably aren’t separate.

 

[Daybooks]

I wouldn’t be too concerned as to whether HMRC see the two businesses as “media related” but more as whether the separation of the businesses is for the avoidance of tax.

You can legitimately set up the two entities as separate limited companies but need to consider the VAT registration for each. You have common control and share resources between the two. Are you convinced by your own justifications?

HMRC might not challenge you for a while but your regulated accountant, if you have one, is duty bound to report suspected tax evasion. Your call.

 

[japancool]

As far I know the same person can't have 2 similar businesses one not registered for VAT and other VAT registered. IR wont like it. You should speak with your accountant first.

A sole trader can't. But someone can have two different limited companies with different VAT statuses, if the businesses are sufficiently separated.

We don't have an IR department, so I wouldn't worry about that. HMRC on the other hand...

 

[Daybooks]

A sole trader can't. But someone can have two different limited companies with different VAT statuses, if the businesses are sufficiently separated.

We don't have an IR department, so I wouldn't worry about that. HMRC on the other hand...

A sole trader can have two or more businesses and report them separately on their tax return. The taxable profits will be combined for national insurance contributions and it may be necessary still to combine the turnover for VAT registration requirements.

HS220 More than one trade, profession, vocation (2024)

www.gov.uk

 

[WaveJumper]

Whats the thoughts sole trader one company, ltd company for the other

 

[Daybooks]

Whats the thoughts sole trader one company, ltd company for the other

You mean artificially separate them?

 

[japancool]

A sole trader can have two or more businesses and report them separately on their tax return. The taxable profits will be combined for national insurance contributions and it may be necessary still to combine the turnover for VAT registration requirements.

HS220 More than one trade, profession, vocation (2024)

www.gov.uk

Yes, but if the sole trader registers for VAT for one businesses, then all of them are registered for VAT since it is the trader himself who is registered, not a "business". The sole trader *is* the business(es).

 

[Ziggy2024]

The answer to the question is yes you can put the businesses into separate limited companies. HMRC could view it as artificial separation therefore you would need to have a solid commercial reason for the separation (other than to avoid charging VAT).

You say that you registered voluntarily? Is the combined turnover over the threshold?

 

[Rawlinson Pryde]

If you are going to have 2 Limited Companies you also need to think about Associated companies for Corporation Tax.

You should go get some proper advice.

 

[scstock]

HMRC might not challenge you for a while but your regulated accountant, if you have one, is duty bound to report suspected tax evasion. Your call.

My first accountant used to run two "separate" businesses - one in his wife's name - so that they could stay under the VAT threshold.

 

[Daybooks]

My first accountant used to run two "separate" businesses - one in his wife's name - so that they could stay under the VAT threshold.

Did his wife know? Complicit?

 

[Ziggy2024]

My first accountant used to run two "separate" businesses - one in his wife's name - so that they could stay under the VAT threshold.

I have also seen this. Accountant merged with another, transferred the VAT registered clients into the "pot" and kept non VAT registered clients in a separate company. Was investigated by HMRC and all considered hunky dory.

It's not necessarily tax avoidance to do something that avoids tax (as roundabout as that sounds).