Moving in with another sole trader

[louise489]

Hi, I really hope someone can help. I’m a sole trader of four years. I sell jewellery and looking to move in with my partner. He is also a sole trader who also sells jewellery. We both do handmade jewellery and light assembly of costume jewellery, but both different styles. Both business have different trading names, completely different products, separate suppliers and sales, plus of course separate online selling platforms / websites. We have run these businesses (my partner longer than I have) for a few years independently at different addresses as above.

My worry is when we move in together the VAT people may investigate us for having a joint business as we live together.. and say that it is one business as it is all under the same category of costume jewellery, along with the fact we will be sharing one residential address.

Am I worrying too much, or am I right to be cautious? We would be sharing an office within the house / garden office of our new home. Should I rent an office space to separate my business so there is nothing ‘joint’ about them.

 

 

I forgot to add I run each year just under the VAT threshold and my partners turnover is pushing £50k, so we would be well over if the businesses would ever be considered joint businesses because of the potential address issue and linking of businesses.

[Trevor S]

Hi – the fact that you’ve both been operating your businesses independently for a number of years helps. HMRC try to prevent new or existing businesses avoiding VAT registration by artificially splitting into two smaller ones, and they’ll then investigate how “independent” the two businesses really are. But in your case, HMRC presumably wouldn’t currently question whether your businesses were truly independent – so you just need to be sure that nothing suggests they’re being merged.

I can see why you’ve considered the option of renting a separate office space, but I don’t think that would necessary prove anything. It wouldn’t in itself prove the independence of the two businesses, as a single business could operate from multiple locations – and you can often get numerous totally unrelated small businesses operating from a shared workspace. Just continue to keep the ownership and practical operation of the two businesses separate. If there are ever any transactions between them (e.g. an advert on one website for the other’s products?), ensure that they are done on proper commercial terms – with the appropriate documentation and charges being invoiced and paid in the businesses accounts. Effectively, make sure that you both treat each other’s business in the same way that you would treat any other competitor business. If the only change that happens to the two businesses is their owners sharing an address, you should be fine.

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