2 businesses - do they have to be combined for VAT

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Hi Everyone,

After a bit of advice...

I am training to become an accountant via AAT.  I'm only a few months in but have been book keeping for a good while both for my own business and my partners.

My partner has two pubs.  He has been self employed since 2016.

I have been helping him with his self assessment return.  Last year was easy as he only had a few months of trade to record for the pub and it was no where near the vat threshold.  

During 2017 the brewry asked him if he would take on a second site.  He agreed on the basis of subletting it to a guy who lived in the area and was really keen to have his own pub but couldn't afford it.  My partner agreed on the basis that the he would get a share of the profit each week and this money was worked out on a percentage and banked by the other guy.  Things didn't really work out that great and it only traded from July 2017 through to March 2018.  The money he receive from it was under the vat threshold but combined with the takings from the other pub (also ran by a manager independently) would take him over the limit.

We were told by a friend who is an accountant that pubs are viewed as separate entities as, well they are separate in everything they do.  We have filled in his return with the figures but are worried that he may now get some sort of fine or at least an enquiry as to why he has two businesses that have a combined income exceeding the vat threshold.  Is this likely?

Any advice greatly appreciated!!

Replies (12)

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RLI
By lionofludesch
21st Jan 2019 13:52

Tell us more about this agreement with Guy Who Lived in the Area.

The terms are crucial to the query.

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Replying to lionofludesch:
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By Accountant A
21st Jan 2019 14:21

lionofludesch wrote:

Tell us more about this agreement with Guy Who Lived in the Area.

The terms are crucial to the query.

Something tells me we have had the full details ....

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Replying to Accountant A:
RLI
By lionofludesch
21st Jan 2019 14:35

Maybe.

Though I was hoping for some kind of partnership.

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By Accountant A
21st Jan 2019 14:22

shelley7t8 wrote:

We were told by a friend who is an accountant that pubs are viewed as separate entities as, well they are separate in everything they do. 

Ah! So that's the secret of Wetherspoon's success!

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By shelley7t8
21st Jan 2019 14:48

Thank you for the replies.

There are some people who want to run their own pub but either can't get the agreements (bad credit), dont have the contacts and/or dont have the money for bonds and first orders.
Many pub management companies therefore take on the agreements on their behalf and let them manage everything to do with the pub. The profit is then shared at the end of the week and is usually a percentage of sales with the on site publican taking the lions share and paying all the day to day expenses. The money the management company take is usually enough to cover rent/buy beer and retain a small profit for their trouble.

In this case the guy running the pub wasn't particularly great at his job and so it wasn't worth continuing hense it only operating for 8 months or so.

Does that make sense?

The other site continues.

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By ireallyshouldknowthisbut
21st Jan 2019 15:32

Hi Shelly, you state "I am training to become an accountant via AAT."

You may as well be training to be a plumber for all the good that is going to do at this stage.

You are not an accountant, and nowhere close to being able to help out something as messy as a pub co.

I would suggest your partner seeks proper tax advice from a professional. Of course if you have sat on your hands for 9 and half pigging months before getting advice you will struggle this week, but file what you can and get advice in Feb.

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Replying to ireallyshouldknowthisbut:
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By shelley7t8
21st Jan 2019 16:21

Sorry, i thought this was a place for helpful advice?

I havent “sat on my hands for 9 and half pigging months before getting advice” as you put it the records for each business are spot on and we had been under the impression that they would be separate up to last week when we were told they might not be hense asking for advice on what i thought was a community forum.

So other than berating me, you dont have any actual advice on the matter?

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Replying to shelley7t8:
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By Accountant A
21st Jan 2019 16:48

shelley7t8 wrote:

So other than berating me, you dont have any actual advice on the matter?

Bookkeeping is not accounting and it certainly isn't tax (VAT, income tax, corporation tax, etc.).

It is crazy to run a business without proper informed and experienced advice from someone who knows the business and its owners.

Ad hoc advice on single issues will not make you tax compliant nor give you the most tax-efficient outcome.

Your choices are appoint an accountant or carry on taking some potentially significant risks.

PS You also need a solicitor - especially if you plan to enter into further agreements with uncreditworthy third parties.

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By Waves
21st Jan 2019 16:46

Where does Ipub Group Ltd feature in all of this?

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By WhichTyler
21st Jan 2019 16:51

Is it just me or does anyone else find the idea of a single pub with income less than the VAT threshold very unlikely, even in these straitened times?

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Replying to WhichTyler:
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By lionofludesch
21st Jan 2019 17:15

I'm wondering that.

I'm wondering whether he's a manager and the fee he receives is his turnover.

The classic VAT question "Who is supplying what to whom?" is as clear as mud at the moment.

Though I'm beginning to think that the guy's taxable turnover is his fee from one pub + his cut from the other.

Happy to be contradicted by a coherent story.

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Replying to lionofludesch:
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By WhichTyler
21st Jan 2019 21:57

lionofludesch wrote:

The classic VAT question "Who is supplying what to whom?" is as clear as mud at the moment.

Probably why it takes so long to get served in here. Let's go to the Winchester...

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