Hi all,
I've got a client who sells musical instuments & also teaches. He has a company but wants to split the teaching income out & put that through a sole trader. Would this class as artificial separation? Splitting the two would keep the company under the VAT threshold. Or am I worrying unnecessarily?
Replies (9)
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700/1 s13.5
Artificial separation is defined in HMRC Reference:Notice 700/1 (Apr 2010) s13.5. I would suggest that the case you outline IS artificial separation.
I think no artificial separation
The teaching income is only VAT exempt if provided by an individual, so if provided via the company it would be standard rate.
Although music is a common factor, I think that the two activities are sufficiently different that they would not be regarded as artificial separation. It is not common for music shops to offer tuition, or for music tutors to sell instruments.
@Cloudcounter – the OP
@Cloudcounter – the OP specifies “but wants to split the teaching income out & put that through a sole trader”. So the intention is for the teaching income to be as a soletrader so my point is valid.
I do agree though that they are sufficiently different to not be regarded as artificial separation.
Hello,
Hello,
There's been an article on this subject on AccountingWEB in the past few months - perhaps that can help you.
Best of luck with finding an answer!
Where...
... would the teaching take place? And are you saying that it's currently being provided by the company?
If the answer to the second question is "yes" and the answer to the first question is "at the music shop", I beg to differ from the other learned respondents.
Eh?
The thing that got me on this thread is that the client opened a bank account in the company name for the sole trader so I have an asset in the company accounts which technically belongs to the sole trade. Does this make any difference to the question? I am considering posting the transactions through DLA.
If this is what concerned you, why didn't you put it in your original question?
Are you now saying that instead of "wants to split the teaching income out & put that through a sole trader", he has already done it? And that cheques payable to him as an individual for teaching are being accepted by the bank for payment into an account in the company's name? Or are the cheques made payable to the company?
If the bank account is in the company name, I think you have no alternative but to treat the receipts into the account as company income.