Sole Trader and Ltd Co joint VAT?

[RichSec]

Hi all.


I am the sole director and shareholder of a Ltd company (domestic cleaning services) which has been running since March 2022 with a turnover of around 79K. I employ several staff, all of whom are PAYE, I also pay myself PAYE.

I am also a Sole Trader business (Gardening services) which was started around the same time but to date this has very much been a secondary business with revenue of around 3K, with myself being the only worker.

Q1, would HMRC consider the two business as seperate entities? Ordinarily I would say yes due to the different business types, the two are not financially linked, no equipment is used for both and there are two seperate bank accounts. There are however a few things which make me question whether this would be the case.
- I work for both (obviously)
- Several clients are clients of both (the services are performed separately but at the clients premises)
- One of my existing Ltd Co staff will be finishing work with that company and I will be employing them through the sole trader business (they will be changing careers in doing so and there will be no overlap of the two).
- Both businesses are registered at my home address (not an office as such), but equipment etc for both are kept there).

Q2, if the annual turnover for my Ltd Co continues to stay below the VAT threshold but my sole trader business grows (this is now expected, in the region of 10K - 15K), will both business's still be classed as under the VAT threshold or both need to become VAT registered? This question is linked to the above as I assume they won't if the businesses aren't deemed to be linked but yes if they are seen as being linked?

Many thanks.

 

[vivente]

Just ask HMRC. It's the only way you can be sure that you will not be hit with an unexpected VAT bill down the line. You are going to need to contact HMRC anyway if you want to open a PAYE scheme for the Sole Trader as that will likely draw a focus anyway on to the topic so best just to have the conversation and know where you stand.

 

[RichSec]

Just ask HMRC. It's the only way you can be sure that you will not be hit with an unexpected VAT bill down the line. You are going to need to contact HMRC anyway if you want to open a PAYE scheme for the Sole Trader as that will likely draw a focus anyway on to the topic so best just to have the conversation and know where you stand.

 

[RichSec]

Thanks for taking the time to reply.

I am also registered for PAYE for my Sole Trader business (I had originally intended on taking a member of staff on).

That's being said, I will just bite the bullet and and the question of HMRC.

Thanks

 

[TheSkyisGray]

Don’t ask HMRC.

 

[lesvatadvice]

There two businesses have too much in common. I would treat as a single business; ask your Accountant which is the better legal entity (sole trader or limited company, etc).
If you maintain them as separate, you will remain vulnerable to HMRC challenge.

And, don't ask HMRC! Tell them.

 

[Gyumri]

The Ltd is a separate legal personality for tax and other purposes. Your gardening business is in your name so you would account for tax separately in your paye and self assessment returns.

But as others have indicated ask your accountant who should be able to put your mind at rest.

 

[DWS]

There two businesses have too much in common. I would treat as a single business; ask your Accountant which is the better legal entity (sole trader or limited company, etc).
If you maintain them as separate, you will remain vulnerable to HMRC challenge.

And, don't ask HMRC! Tell them.

Agree with Les, too much in common between the too, you definitely need to sit down with your accountant and discuss this.
And never ever ask HMRC for advice!