Two separate businesses run by a husband and wife have been investigated to find out whether they are, in fact, one business that is liable to register for and pay VAT, or two independent businesses.
The businesses each involve food – in fact it’s a café and restaurant trading right next door to each other, so it was reasonable to question the business set up.
As it turned out, the couple were ruled to be running separate businesses for VAT, with each of them trading under the registration threshold. The husband runs the café and his wife runs the restaurant. Together, the two eateries’ turnover is enough to exceed the VAT threshold, but separately they’re not.
It’s not the first time a case like this has come to light. There have been other instances of married couples each running their own businesses but trading from one site, where HMRC has claimed they’re running a single business. The kind of factors HMRC reviews include things like shared websites or telephone lines, joint recording keeping and bank accounts, using the same trading name and whether or not a partnership self assessment tax return has been completed. Tribunals also look at the couple’s intentions and whether it’s clear that they are working separately.
In this case HMRC investigated as it thought that one person owned both the restaurant and café as a single business, so should have registered for VAT once the joint revenue passed the threshold. But the Tax Office can launch an investigation for any number of reasons. And when they do, it can be drawn out, costly and extremely stressful.
That’s why we run a Tax Protection Service. You can find out more about this here and see how we saved one client £2,600.