Self Employed Taxi Driver and Cross Charging

Didn't find your answer?

I have taken on a self employed taxi driver who has two self employments one as a tax operator and the other as a tax driver. The tax operator (office) receives calls from members of the public and then allocates the work to several self employed taxi drivers of which my client is one. The tax operator supplies the radios which are used by the drivers to communicate with the office.  Each week the office then invoices the individual drivers, including my client, for rent of the radios based on the number of shifts they have worked.

 Lets say that at the end of the year my client has been invoiced £8,000 for radio hire.

Should I include the £8,000 in the turnover of his taxi operator business and show it as an equivalent expense in his individual taxi driver business. Or alternatively should I exclude the £8,000 from the tax operator income and from the expenditure in his taxi driver accounts. As far as his net profit for tax purposes is concerned there will no differene in the taxable profits. My concern is that he could creep above the VAT threshold if I did it the first way. Though a VAT expert has told me that the cross charging would not be a taxable supply for VAT purposes as he is effectively billing himself!! 

Any comments to clarify would be much appreciated.

 

 

 

 

Replies (7)

Please login or register to join the discussion.

RLI
By lionofludesch
12th Mar 2017 16:35

These are very closely related businesses. Have they always been kept entirely separate ?

If they are, I would include the rental charges as income of one business and an expense of the other. Legally, I agree these should be excluded from VAT turnover calculations as there is no third party involved. Indeed, there's not even a second party. However, I wouldn't be surprised if HMRC's super-efficient staff picked up the sniff of a late VAT registration.

Thanks (1)
Stepurhan
By stepurhan
13th Mar 2017 11:46

How is this working in practice?

If your client needs to man an office, they cannot allocate work to themselves. Are they employing other people to man the office when they are out driving? Are they actually just working shifts in someone else's office, then driving the rest of the time? Who is doing the actual billing?

The arrangement sounds a bit like a single self-employment. A taxi driver has set up an "office" (possibly all calls redirect to his mobile in his taxi) and is simply passing out work they can't/don't want to take on to other drivers. If that is the case then they should not be billing themselves at all.

Thanks (0)
Replying to stepurhan:
RLI
By lionofludesch
13th Mar 2017 12:32

stepurhan wrote:

How is this working in practice?

I have to say that it would seem difficult - though not impossible - to keep the expenses of the two businesses separate.

Is there a reason for keeping the businesses separate ? Or is it a waste of time ?

Thanks (0)
Replying to lionofludesch:
Stepurhan
By stepurhan
13th Mar 2017 14:13

lionofludesch wrote:

Is there a reason for keeping the businesses separate ? Or is it a waste of time ?


The £8,000 billed to the "separate" taxi driver business would cause the taxi operator to slip over the VAT threshold. I am therefore guessing the separation is intended to avoid VAT registration.

If that is the case there is a different problem.

Thanks (0)
Replying to stepurhan:
RLI
By lionofludesch
13th Mar 2017 14:29

stepurhan wrote:

lionofludesch wrote:

Is there a reason for keeping the businesses separate ? Or is it a waste of time ?

The £8,000 billed to the "separate" taxi driver business would cause the taxi operator to slip over the VAT threshold. I am therefore guessing the separation is intended to avoid VAT registration.

If that is the case there is a different problem.

Well that's not going to work if the businesses are owned by the same person !!

Bless me !!

Thanks (0)
Replying to lionofludesch:
Stepurhan
By stepurhan
13th Mar 2017 14:42

lionofludesch wrote:

Well that's not going to work if the businesses are owned by the same person !!

Bless me !!


Oh you've ruined my fun by revealing what the different problem was. I was hoping the OP would guess. :-)
Thanks (0)
Replying to stepurhan:
RLI
By lionofludesch
13th Mar 2017 15:02

stepurhan wrote:

Oh you've ruined my fun by revealing what the different problem was. I was hoping the OP would guess. :-)

Oh - I do apologise.

Meanwhile, let's see how narrow we can get these reply boxes.

Thanks (1)