FHL - VAT threshold

Do they need to formally register a partnership?

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A client currently has a self-employment trading just below the VAT threshold.

The client has also purchased an FHL with her partner.

Will the sales from the FHL business be included in the total taxable supplies for the purposes of the VAT threshold or is it treated as a separate single business? Do they need to register a formal partnership for the FHL sales to be excluded?


Replies (5)

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Replying to David Ex:
By Matrix
03rd Sep 2023 12:39

Thanks so does a partnership have to be registered under SA and the FHL declared on the partnership pages for the FHL business to be treated as a separate taxable entity for VAT?

Under Stage 9 of the attached, I think it is a separate analysis but would be grateful for thoughts:


I don’t know why it says the flow chart is for the construction industry since it doesn’t say so here:


Thanks (0)
By Jason Croke
03rd Sep 2023 13:22

It would need to be a properly identified partnership in my view.

The risk otherwise is that HMRC will assume the rental income belongs to the sole trader or at least half of it, either which will take the sole trader over the VAT threshold.

Thanks (1)
Replying to Jason Croke:
By Hugo Fair
03rd Sep 2023 14:10

To put it even more bluntly, it would be sensible to start from the premise that HMRC's default position will be to include sales from the FHL business in the total taxable supplies for the purposes of the VAT threshold.

So, as always, what OP needs to research is the degree to which that risk can be minimised by taking actions now that will demonstrate the opposite position.
And creating distinct entities would at least be a start down that road.

BTW, OP has used 'partner' and 'partnership' without clarifying their meaning ... I'm presuming that the former refers to their client's love interest not someone involved in any existing business, and the latter to a formalised future business arrangement.

Thanks (2)
By Matrix
03rd Sep 2023 16:48

Thanks I will go back to the income tax position then to address this risk, but I don’t think that the absence of a partnership for income tax purposes necessarily means that she is a taxable person for VAT purposes for the FHL, see the above flow chart and https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper52000.

Previous two threads came to a different conclusion and no conclusion: https://www.accountingweb.co.uk/any-answers/avoiding-vat-on-fhl-business


The “partner” is only a partner for the FHL not the self-employment which is a sole trade.

I assume they won’t have to pay Class 4 NI.

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