Potential accounting problem! (2 separate businesses)

[LizReynolds72]

Good morning,

I think I have a slight Delmer which i am now finding out processing my first tax year finances.

I rent a building from a landlord and setup a business on the ground floor as a retail store and half way though I changed the use of the property's storage room to open up a second business as a sole trader but a Childs soft play centre with café.

So in theory one is a retail store and the other a entertainment venue.

Sadly I have made some bad errors here and I need some advice on what to do next.

The issue is I used the same card machine vender (merchant) and bank account. At the time I thought I would just be able to show the two differences from separate epos systems regards to sales data, which yes i can, but obviously my bank statements make it look as if I have one business over the vat threshold.

I'm changing this going forward to make thing clearer but what do i do?

thanks
Elizabeth

 

[Scalloway]

If you are a sole trader all your businesses count for calculating the VAT threshold.

 

[WaveJumper]

Welcome to the UKBF I am sure our accountant members will be along with some advice pretty soon in the meantime a couple of questions spring to mind. Are the companies really completely separated and not just a convenient way to stay under the VAT threshold, HMRC are pretty hot on this.

If nothing else your going to have too laboriously go through all your bank statements, paper work etc and highlight which belongs too which company to separate out. Have you created two separate companies or trading as a sole trader?

On a slightly different tack I assume your landlord has given permission (in writing) for you to sub let the space to your new company / venture and on top of this have all the local planning requirements in place.

 

[WaveJumper]

I would also add having an accountant onboard would have been a pretty good idea and I am pretty sure would have saved you more in tax than they would charge and a lot heartache and stress

 

[Lisa Thomas]

I would definitely recommend paying an accountant for professional advice and help going forward.

There may be other accounting and tax mistakes you have made.

I can recommend an accountant if you DM me.

 

[Newchodge]

Is your first business also a sole trader?

 

[paulears]

I think everyone here is thining the same - you started the business, then added an extra different business. I guess that describes me pretty well. I'm a sole trader, and I have always done entertainment and music as my core business. Covid wrecked this, so I started selling two-way radios, mainly to boat people as they seemed immune from covid depression. I have one business doing entertainment and another doing sales - but as far as HMRC is concerned, it is one business - me! If you are a sole trader, then everything you earn money from is the same - you! I have a business bank account, a VAT registration and all money in is mine, all money going out comes from me. HMRC is not even interested in which part of my business money comes from. It is my turnover and income. Splitting it serves no real purpose. It does impact on how my accountant deals with it at the year end, because now I sell things, I have money tied up in stock - so accountancy wise, my software keeps track of it all, so I have money tied up in stock. I'm not sure how he hives things off to different business areas.

If you buys and sell, as opposed to offering services, your status is vital. A Ltd company and a sole trader part of your business is workable, but your accountant has plenty to do - separating the two, which might make VAT registration not required, but if your margin from selling things is livable on, then your purchases make the VAT limit look pretty small. If you have not used Ltd Company status you're probably going to have an unexpected VAT component that HMRC will want you to pay. 20% of your income was actually theirs, not yours. That's a bit over simplified but possible!

That is why people are asking questions

 

[Blood Lust]

Good morning,

I think I have a slight Delmer which i am now finding out processing my first tax year finances.

I rent a building from a landlord and setup a business on the ground floor as a retail store and half way though I changed the use of the property's storage room to open up a second business as a sole trader but a Childs soft play centre with café.

So in theory one is a retail store and the other a entertainment venue.

Sadly I have made some bad errors here and I need some advice on what to do next.

The issue is I used the same card machine vender (merchant) and bank account. At the time I thought I would just be able to show the two differences from separate epos systems regards to sales data, which yes i can, but obviously my bank statements make it look as if I have one business over the vat threshold.

I'm changing this going forward to make thing clearer but what do i do?

thanks
Elizabeth

Its always best to keep two business entities completely separate from each other.

You will likely need the services of an accountant. Its straight forward to fix, they are trained to forensically piece together accounts. It`ll cost you though.

 

[MyAccountantOnline]

Good morning,

I think I have a slight Delmer which i am now finding out processing my first tax year finances.

I rent a building from a landlord and setup a business on the ground floor as a retail store and half way though I changed the use of the property's storage room to open up a second business as a sole trader but a Childs soft play centre with café.

So in theory one is a retail store and the other a entertainment venue.

Sadly I have made some bad errors here and I need some advice on what to do next.

The issue is I used the same card machine vender (merchant) and bank account. At the time I thought I would just be able to show the two differences from separate epos systems regards to sales data, which yes i can, but obviously my bank statements make it look as if I have one business over the vat threshold.

I'm changing this going forward to make thing clearer but what do i do?

thanks
Elizabeth

I suspect you've done exactly what a lot of people starting a new business do - tried to save cash by not paying an accountant, and concentrated on the business and not tax and finances until tax returns are needed.

It's such a shame you didn't take professional advice at the onset, but you aren't alone.

If you are a sole trader any attempt to separate your business now is going to have to be done very carefully, if it's possible, to prevent HMRC contesting it's being done to evade VAT.

what do i do?

Dont leave it any longer get in contact with a good accountant.

 

[Paul Kelly ICHYB]

Dont leave it any longer get in contact with a good accountant.

Do this!

 

[paulears]

She never came back? Sad.