Employment, sole trader & partnership (all at once) - trouble understanding it all.

[Lewis Morris]

This is a tricky one so bear with me. If anyone can push me in the right direction with any of these I would greatly appreciate it.

I'm employed part time, and a sole trader but I also want to start a partnership with someone else (a third venture).

1) Do I have to register as a sole trader twice or do I register the partnership with my current one.

2) You don't charge vat when your sales in a rolling 12 months are under £85,000. I understand as a partnership we will both technically be separate... What happens IF (a big if) I go over £85,000 but my partner does not. Does the partnership charge vat?

3) We are splitting 50/50 so on our self assessment do we just split all the figures in half when we declare?

4) Are there any implications due to the fact i'm already employed?

5) BONUS QUESTION - if we go over £85,000 sales, that means sell price automatically becomes 20% higher as we have to add VAT or do we sell the same and factor the VAT into the sell price then claim that VAT back at the end of the year? I'm slightly fuzzy on this.

 

[Scalloway]

1) Do I have to register as a sole trader twice or do I register the partnership with my current one.

You don't need to register twice. The partnership needs to be registered.

2) You don't charge vat when your sales in a rolling 12 months are under £85,000. I understand as a partnership we will both technically be separate... What happens IF (a big if) I go over £85,000 but my partner does not. Does the partnership charge vat?

If your sole trader business is VAT registered the partnership doesn't have to be, they are separate enitities.

3) We are splitting 50/50 so on our self assessment do we just split all the figures in half when we declare?

The partnership prepares its own self assessment. You show the profit share on the partnership form and each partner shows their share on their own self assessment.

4) Are there any implications due to the fact i'm already employed?

Apart from all your partnership income being taxed at 20% (or higher) there shouldn't be any.

) BONUS QUESTION - if we go over £85,000 sales, that means sell price automatically becomes 20% higher as we have to add VAT or do we sell the same and factor the VAT into the sell price then claim that VAT back at the end of the year? I'm slightly fuzzy on this.

If you are VAT registered all your standard rated sales include 20% VAT. Whether you increase your prices is up to you. You send in a VAT return quarterly and reclaim VAT any VAT you have paid by setting it against the VAT you have charged on sales.

 

[Mr D]

4) Are there any implications due to the fact i'm already employed?

5) BONUS QUESTION - if we go over £85,000 sales, that means sell price automatically becomes 20% higher as we have to add VAT or do we sell the same and factor the VAT into the sell price then claim that VAT back at the end of the year? I'm slightly fuzzy on this.

Your employer may have something to say. Often enough contracts require permission for external work though some operate stealth businesses and don't bother telling the employer.
Not all employers are interested. However some may be concerned about working time or where you put your effort.


The £85k is over a rolling 12 month period rather than accounting year so keep an eye on your sales.
Whether you increase your prices or by how much is up to you. However while VAT is standard rate of 20% it does not mean you will have to increase prices by 20%.

If not on the flat rate scheme you claim the relevant VAT paid out to suppliers against the VAT you collect from the customers.
The buyers pay 20% VAT, does not mean the business hands over that entire sum.

For instance buy a product at £10 plus VAT, you pay £12. Sell it at £30 plus VAT, £36 total, buyer is paying £6 VAT. However you claim the VAT paid of £2 - so you'd hand over in that example just £4.
Its rather more complicated than that as all your relevant VAT can be claimed, not just item purchase costs.

Or look at flat rate scheme. Much easier on the admin.

VAT is ideally something to discuss with your accountant at the time.