Can a business engage in radically different activities?

There is an existing business; in previous years the business has made a profit, paid company tax and declared dividends.  Last financial year due to recession the company made a loss.

The company is a clothing boutique selling clothes online and in brick & mortar stores.

The son has started earning income as an management consultant from a few companies.  No IR35 issues.  He also does management consultancy and strategy for the business.

The son wants to invoice clients from the family business instead of forming a separate limited company for the management consultancy.

There are advantages to this: centralized administration, one set of accounts prepared, no extra expenditure in company formation.  This also has the tax benefit of taking the consultancy income and subtracting any trading losses to determine corporation tax.  This will not be a benefit if and when the trading arm makes a profit.

They are aware this arrangement means the consultancy income is not eligible for flat rate VAT [the business is not eligible for flat rate] as well as potential professional indemnity lawsuits being able to claim over business assets and accept this.

Are there any other potential pitfalls in this arrangement to be aware of?

Will the HMRC have any grounds for challenging the mixing of consultancy income with trading income from clothing?  Can the business be made to segregate revenues and expenses in each division, with profits and losses quarantined to each division?