VAT on taxi driver takings

VAT on taxi driver takings

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I have a new client who is a taxi driver with turnover of c £10k p.a.  He has just acquired the lease on a pub which turns over c £3k per week.  He is running the pub as a sole trader at this stage and is not VAT registered.  He will obviously take steps to register in about 6 months time when pub t/o reaches the threshold.  a) Does he need to take into account the taxi takings when assessing his turnover in relation to the threshold?; b) if so will he then need to account for VAT on the taxi takings?; and c) is there a way to structure this to avoid VAT on the taxi takings? e.g run the pub through a company?  I am looking to justify a separate trade and feel in no way that this is an artificial splitting exercise.

(The client's wife helps out in the pub and so there is scope to give her a stake as a partner or director/shareholder). 

Any input, views, titbits, advisory nuggets will be welcomed with open arms! 

Thanks in advance.

Replies (9)

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the sea otter
By memyself-eye
17th Aug 2011 09:35

If the pub was trading previously

ie. a going concern - It must have been VAT registered, and your client has no option but to register.

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Euan's picture
By Euan MacLennan
17th Aug 2011 10:00

And

(a) & (b) - Yes, since you say "he" has acquired the pub lease and only "he" can be the taxi driver.  He would be VAT registered as an individual and VAT must be applied to all the supplies he makes as an individual.

(c) - Quite possibly as either a partnership or limited company, but he is going to have to change the pub lease from his individual name.  Incidentally, I would have thought that if he is continuing as a taxi driver, his wife would have to do more than just "help out" in the pub.

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Quack
By Constantly Confused
17th Aug 2011 11:37

Euan

Not disagreeing with you, but given how pubs and taxis are clearly distinct trades, with presumably a set of SE pages each, wouldn't they be distinct for VAT purposes?  I'm being stupid aren't I... if they had bought a building and let it, the exempt income would infringe on their ability to recover VAT on their main business...

Am I being daft?

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By MartinLevin
17th Aug 2011 13:39

This is an old chestnut. 

This is an old chestnut.  Previously a Taxi-Driver (sole) acquired a launderette (sole).  In VAT law it is the INDIVIDUAL that is registered not the business.  As a result VAT was accountable on both "trades".  That was embarrassing for the cabbie.

Solution?: The pub could be run as a partnership with the wife.  She could also run the catering side of the pub herself (sole trader).  Separate books and records need to be kept.  But at least there will be 3 separate categories to decide whether it was compulsory to join the VAT Club. 

 

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Quack
By Constantly Confused
17th Aug 2011 14:07

Interesting

Thanks for that Martin, so in your solution it is presumably still possible they would be treated as one business (if they had managerial/financial interdependance), but as a starting point a ST, another (related) ST and a partnership between the two are three VAT businesses.

Thank you for that!

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the sea otter
By memyself-eye
17th Aug 2011 15:57

It will be nigh on impossible

To seperate the true catering costs from the 'wet' side of the pub even if the client has the capability of doing so and will invariably be challenged by HMRC

One seperation too far, I think.

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By brownbowl
17th Aug 2011 21:00

Cheers

Thanks all for your input.  The pub does not serve food so we do not need to do down the triple business route but I feel a "non sole trader" structure for pub is a solid practical approach.  The client is on a trial period and the acquisition of the lease has not gone ahead yet so there is still scope to form a company/partnership for the purpose.  There is also the chance that time taken up at the pub will diminish my client's taxi takings anyway which lessens the panic anyway. 

Memyself-eye - thanks for your TOGC comment because as much as the client has confirmed he is acquiring a new lease from the the brewery (and not an ongoing business) I will seek double clarification on this.

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the sea otter
By memyself-eye
18th Aug 2011 09:21

TOGC - The key issue is

Was the pub shut for an extended period prior to the new lease. If so, and assuming the stock and F&F was NOT purchased from the outgoing tenant you have a good case not to register yet - subject to the status comments above of course. 

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By petersaxton
20th Aug 2011 09:40

Worth it?

Given the small turnover of the taxi business and the extra costs involved of using a limited company, is it worth using a limited company?

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