VAT and side-hustling

Discussion in 'General Business Forum' started by glengraving, Jul 3, 2019.

  1. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    Hi
    All going well, I'll be taking over a brick and mortar retail business in the near future, and as such will need to become a VAT registered sole-trader. With retail not being the bustling sector it once was, I may find myself with plenty down-time to think of side businesses to try.
    How does running unrelated side businesses work when you are a 'taxable person'?

    Two of the main aspects of the retail business are Key Cutting and 'household goods' retailing. Independently, these wouldn't reach the VAT threshold, but trying to separate and account for them separately would be a clear case of evasion, and wouldn't fly. That much is obvious.

    We also do a little bit of engraving in-house. If I were to set up an e-commerce store to try new engraving services/personalised goods and reach new markets, that would obviously also fall under the turnover of the main retail business.

    But business is slow, and I'm a not-bad musician, so a say I decide to start giving guitar lessons from the staff-room of the store in on occasional evenings after the store has closed. That's a separate business, no VAT to pay on that, right?

    I've also started up an unrelated print-on-demand T-shirt store, not earning anything so far but gradually I'll add designs and it may in time earn me a couple hundred quid a month, fingers crossed. No vat to pay on that, right?

    Say I start to video blog the ups and downs of life as an independent trader (and bard) on YouTube, giving business advice and whatnot - and by some daft miracle this YouTube channel gains a million views and I start getting a bit of ad revenue - that's a separate venture into media production, no vat to pay on it right?

    And I use my inexplicable YouTube fame to sell even more Print-on-demand merch, but then I realise I enjoy making things with my own hands anyway, so I buy a dye-sublimation/printing equipment and start to produce the shirts myself. But at this point, I'm creating things to sell in the workshop of my retail business (which already produces personalised goods), so it's essentially an extension of that - so do I pay vat on that?

    Indulge my daft examples, howzit work?
     
    Last edited: Jul 3, 2019
    Posted: Jul 3, 2019 By: glengraving Member since: Jan 24, 2019
    #1
  2. johndon68

    johndon68 UKBF Big Shot Full Member - Verified Business

    3,402 627
    As a sole trader you are the business (or businesses) so all the earnings, regardless of where they can from, count towards the VAT.

    John
     
    Posted: Jul 3, 2019 By: johndon68 Member since: Nov 2, 2009
    #2
  3. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    I thought that'd be the answer. No fun allowed.

    So if I decided down the line to turn the retail business into a Ltd Company, I could draw a salary from that and still be a sole trader with creative side-businesses (well under the VAT threshold) - provided those businesses are unconnected enough to the Ltd Company - and I shouldn't need to pay VAT, right?

    Going Ltd. isn't on my radar at all, this is just a hypothetical for my information. The idea that one couldn't try to monetise a hobby without paying VAT for the pleasure sounds like a ball and chain.
     
    Posted: Jul 3, 2019 By: glengraving Member since: Jan 24, 2019
    #3
  4. johndon68

    johndon68 UKBF Big Shot Full Member - Verified Business

    3,402 627
    You'd have to show that the businesses are unconnected but if, as you said, you'd use a room in the store for the music lessons you might struggle...

    John
     
    Posted: Jul 3, 2019 By: johndon68 Member since: Nov 2, 2009
    #4
  5. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    Ah, I'm silly and completely overlooked the fact that there would be shared expenses of the two businesses using the same premises (mortgage payments, electricity etc), and how that raises a load of red-flags for HMRC.
    Private tuition from a spare room in my house would get them to lower their red-flags, and should be fine then.

    Another hypothetical - say I enjoy leathercraft as a hobby. I get good enough at making wallets and watch straps and belts to make some money selling products on Etsy. I make the items in my spare bedroom at home, so no complications of business premises use there.
    The b&m retail business (ltd.) happens to sell cheap imported wallets, watch straps and belts - different products, different means of selling, no red flags. Good? Good.

    The Ltd. company decides to go upmarket and start selling a range of handcrafted, locally sourced, gluten-free wallets, watch straps and belts - would there be any way HMRC wouldn't find it sketchy af to buy products from myself? [perhaps if it was an established practice of the sole-trader leathercrafting business to offer it's products wholesale?]
    Sounds sketchy. Almost as sketchy as telling customers with classier tastes to 'check out this cool etsy store I found' when they aren't interested in the cheaper tat.
     
    Last edited: Jul 3, 2019
    Posted: Jul 3, 2019 By: glengraving Member since: Jan 24, 2019
    #5
  6. WaveJumper

    WaveJumper UKBF Enthusiast Free Member

    564 101
    But then surely you would want to buy the equipment, materials etc for producing the items (and maybe even claim the VAT back) in the first place, and also claiming for heating and lighting for the room your making them in .......... try not to make things to complicated for yourself, you will end up spending a lot of wasted time just trying to sort your books and tax returns. My advice sit down and have a good chat with your accountant to find the most efficient way forward
     
    Posted: Jul 3, 2019 By: WaveJumper Member since: Aug 26, 2013
    #6
  7. Mr D

    Mr D UKBF Legend Free Member

    18,955 2,201
    HMRC would be looking at whether you are treating the transaction between you and the business like you would any other customer.
    If you sell to other companies at £3 a strap then you can sell at the same price to your company.
    Of course that affects your personal income then...

    Seriously, it can be more tax efficient for you to run stuff through your company. Your accountant should know or be able to find out what is best tax wise.
     
    Posted: Jul 3, 2019 By: Mr D Member since: Feb 12, 2017
    #7
  8. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    ^sure, it'd be the same wholesale price for any retailer looking to buy. I suppose if the wholesale price was too high, and as such no other retailer regularly bought stock, then HMRC would reckon I was taking the piss and intending to be my only distributor.
    In my hypothetical I was thinking of a hobby with a relatively low cost of entry/consumables, such that the individual wouldn't mind it being a personal cost - then later finding that they can earn a few quid by selling wares, but in a marketplace where most people are trading under the VAT threshold, the extra cost being disadvantageous.

    Of course you guys are right that I'm complicating this. Keep it simple.
    Just trying to dream up scenarios where Ltd. and non-Vat sole-trader could be run in parallel safely. As I say, this is all very hypothetical and I've no intention of going Ltd. anyway, so it's moot, and if it becomes unmoot I'll be talking to an accountant.
     
    Last edited: Jul 3, 2019
    Posted: Jul 3, 2019 By: glengraving Member since: Jan 24, 2019
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

    18,955 2,201
    I think they would be more concerned if you sold to your own company at lower price.
    You could sell higher price, what with your personal income from profits being higher tax rate than company tax rate. Be kinda idiotic from a tax saving point of view but probably acceptable from a tax paying point of view by paying more tax.
     
    Posted: Jul 3, 2019 By: Mr D Member since: Feb 12, 2017
    #9
  10. GFI

    GFI UKBF Newcomer Free Member

    29 4
    I assume it's Glen...

    Hi Glen,

    From reading and enjoying your other thread I cannot see where on earth you will find the TIME for these other avenues and forays!!

    Taking on the bricks and mortar hardware store, and all it's "dusty" stock will fill your days AND nights for the first 18-24 months, if not 36-48 months.

    Focus soley on that enterprise now, and only that. Do not get carried away before you have even started.

    Then look to diversify if relevent and most importantly - the cashflow can support it.

    Happy to talk through my (very limited, new start up) experiences if you think that would help. PM me any time.

    Paul.

    I wish you all the good grace and favour - but that won't MAKE it work.
     
    Posted: Jul 3, 2019 By: GFI Member since: Jan 30, 2019
    #10
  11. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    :D you're not wrong. Just indulging daft ideas and trying to learn about what tax will mean for me. I've got plenty time for learning atm, as the business hasn't changed hands quite yet.
     
    Posted: Jul 3, 2019 By: glengraving Member since: Jan 24, 2019
    #11
  12. GFI

    GFI UKBF Newcomer Free Member

    29 4
    Right now the one word that matters in your reply is - daft : )

    You'll need your sleeves rolled up and a focused mind for the b&m sort out and re-launch!!

    But get that done, then start to think bigger and in other directions (no point trying to side step the HMRC, the first whiff they get of it they will make life difficult and expensive).

    One of the most frequent reply's I see on this forum is: Consult a reputable local accountant - the £ spent on that saves ££££ in the future!!
     
    Posted: Jul 3, 2019 By: GFI Member since: Jan 30, 2019
    #12
  13. consultant

    consultant Your Business Community Staff Member

    5,522 767
    Isn't this enough to make you reconsider your plan......?
     
    Posted: Jul 5, 2019 By: consultant Member since: Jan 21, 2008
    #13
  14. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    Nah
     
    Posted: Jul 5, 2019 By: glengraving Member since: Jan 24, 2019
    #14
  15. alan1302

    alan1302 UKBF Enthusiast Free Member

    733 131
    Why? You are investing money into something you know is struggling...so why do you not worry about that side of it?
     
    Posted: Jul 5, 2019 By: alan1302 Member since: Jun 2, 2018
    #15
  16. glengraving

    glengraving UKBF Contributor Free Member

    93 40
    worrying is different from reconsidering. I'll put my efforts into finding ways to get more from the business - perhaps that means offering new products and services.
     
    Posted: Jul 5, 2019 By: glengraving Member since: Jan 24, 2019
    #16
  17. OhhEnnEmm

    OhhEnnEmm UKBF Contributor Free Member

    54 4
    I'm liking this thread, delving into the wild word of VAT, LTD companies and sole trader rules and regulations... You brave people :D

    Would be an amazing thing to know in depth!
     
    Posted: Jul 5, 2019 By: OhhEnnEmm Member since: Nov 6, 2018
    #17
  18. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,086 2,254
    If I was in your shoe's and had made up my mind to go into retail with a shop, then all my spare time would be spent building up a online store to compliment the b&M shop, you would soon find there are not enough hours in a day to sort out the marketing of the online shop along with the trifles of dealing with orders and stock control, but you will have the enjoyment of draging a reclining industry into the modern world
     
    Posted: Jul 5, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

    18,955 2,201
    Perhaps require 50 years study to know in depth, however a lot of it can be picked up in just a few years. And things tend to change over time.
    Been self employed several times and still finding stuff that would have been helpful to know at the time.
     
    Posted: Jul 5, 2019 By: Mr D Member since: Feb 12, 2017
    #19
  20. elitebridge

    elitebridge UKBF Newcomer Free Member

    3 1
    Really interesting thread.

    I’ve worked with one or two local hardware stores which are now successfully online. And I see many others.

    It’s actually a very good area of business now. And what has been great is seeing these businesses develop their own products to sell alongside others. It’s a way forward for local retail to become a producer (albeit from overseas but who knows what could happen with time) and really be a little hub of activity. With hardware in particular you really can build a brand identity akin to what appealed to people in days gone by, and believe it or not, carry this over the internet.

    While you’re sat waiting for people to come in to get a key cut, you could be shipping internationally, even. If we had more stores doing things like this, the fabric of our retail stores would start to lift this country out of the gutter.
     
    Posted: Jul 6, 2019 By: elitebridge Member since: Mar 13, 2019
    #20