Sharing shop space

[Worksop]

Hi, so I have a fabric shop and online business which retails dressmaking fabrics as a sole trader. Happily ticking over around the £80k range. I have no desire or need to go beyond this for my own financial needs. However my son has had a great idea to expand the business and also sell curtain and furnishing fabrics. This will be alot more work and will take me over the VAT limit. What i would like to do is put any arrangements on a proper business footing rather than doing a family member a favour if that makes sense. I am thinking I could rent out a space in the shop (which I own) for the curtain fabrics to my son. My main problem is when customers make a purchase payment would be taken from the same card machine I use...we would then divert the money taken into 2 seperate accounts depending on if its my stock or his? It would essentially operate in the same way an antique centre with booths works. Ive been told this could look like VAT avoidance?

 

[Picture Bute]

Hi, so I have a fabric shop and online business which retails dressmaking fabrics as a sole trader. Happily ticking over around the £80k range. I have no desire or need to go beyond this for my own financial needs. However my son has had a great idea to expand the business and also sell curtain and furnishing fabrics. This will be alot more work and will take me over the VAT limit. What i would like to do is put any arrangements on a proper business footing rather than doing a family member a favour if that makes sense. I am thinking I could rent out a space in the shop (which I own) for the curtain fabrics to my son. My main problem is when customers make a purchase payment would be taken from the same card machine I use...we would then divert the money taken into 2 seperate accounts depending on if its my stock or his? It would essentially operate in the same way an antique centre with booths works. Ive been told this could look like VAT avoidance?

Is there a reason he can't just set up his own bank account and zettle/sumup card machine so that he takes his own payments ?

 

[Worksop]

Is there a reason he can't just set up his own bank account and zettle/sumup card machine so that he takes his own payments ?

Good point, no not really apart from the fact sometimes customers may buy curtain fabric and dressmaking fabric so it may be tricky, though its def worth considering as im not sure this would be the case very often...I have a zettle card machine and a merchant paypal account but I dont want to get the 2 muddled

 

[WaveJumper]

I can understanding your thinking but I think you would find it very difficult not to fall foul of HMRC on artificial separation rules.

 

[Worksop]

I can understanding your thinking but I think you would find it very difficult not to fall foul of HMRC on artificial separation rules.

I appreciate on the surface it may look like that but they really would be 2 seperate entites, different suppliers, different invoices, bank accounts etc...just under the same roof + we dont sell curtain fabric atm so it would be a new area to go into?

 

[WaveJumper]

So any shop in the high street could say for arguments sake we have a handbag section, a shoe section and another part selling cloths.

 

[Worksop]

So any shop in the high street could say for arguments sake we have a handbag section, a shoe section and another part selling cloths.

So any shop in the high street could say for arguments sake we have a handbag section, a shoe section and another part selling cloths.

Not if you are running your own accounts, bank accounts, website, and payments though surely and trading under 2 names...it would only be like a antique centre having lots of booths run by different people?

 

[MOIC]

@Worksop Contact HMRC and ask for their advice, as to how to separate the 2 businesses trading within the same shop, or get your accountant to advise.

It's definitely not the same as how an antique centre operates . . . . . for many reasons.

 

[WaveJumper]

As above check with HMRC and your accountant.

If you think of a large department store which may have several concessions, the concessions are companies in their own right, using their own payment systems, will have a licence or lease in place, so paying rent, a portion of service charge etc etc . You may be able to set up a structure like this, however HMRC might say “hey guys” you’re all from the same family here this is a clear separation to avoid VAT. Which unless one of the accountants on here sees this differently I would say this is exactly how HMRC would view this.

So again check with HMRC & your accountant. I would add though to many business’s worry about the VAT threshold in my book what you should be asking yourself is by increasing the offer in your shop how can I get my turnover 280k a year and beyond, don’t hold back the potential by worrying about the threshold.