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VAT for Hairdressers

Change in business structure

Please refer to my post some time ago, which led to the setup of a couple of persons using the same salon being set up to trade as self employed persons (i.e. both shared running costs of salon, but assessed for their individual variable income seperately) >>>https://www.accountingweb.co.uk/any-answers/hairdresser-set-up-advice

They now wish to incorporate which would see them go over the VAT threshold as one combined business now, trading under the Salon name as opposed to "person a @ salon name". They wish to do this as they want to employ staff and to split everything down the middle, pay selves a set wage/divi etc. as well as ring fencing themselves so to speak.

Their new accountant has kicked up a fuss and is arguing against the original set up (detailed in the other post) and saying they should have always been VAT registered, that this is "diversification to avoid VAT" and reitterated that to employ people you cannot be a sole trader (not disagreeing on this point).

A lease was take on the salon to which they both signed the agreement. Is this of any relevance to whether they are self employed or not?

NB: the salon itself  isn't set up as a business and generates no revenue as such, it is just a place of work which the guys share the costs on.

What is your view on the accountants point? i believe that the VAT registration should be from date of new agreement is put into place - as this is then a partnership with a profit share arrangements as oppose to in the past where they have operated as individuals within the salon.

 

Thanks in advance as we both have differing viewpoints

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13th Jan 2018 12:38

Their new accountant has kicked up a fuss and is arguing . . . . . and reitterated that to employ people you cannot be a sole trader (not disagreeing on this point).

Are you sure about that?

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By jcace
to andy.partridge
13th Jan 2018 13:32

I'm guessing that what is meant here is that they cannot jointly employ people if they are sole traders

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to jcace
13th Jan 2018 14:17

Yes correct - sorry wasn't clear

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to andy.partridge
13th Jan 2018 14:17

*jointly...

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By jcace
13th Jan 2018 14:03

Are they incorporating or entering into partnership? You mention both.
You will be aware of the risks and potential arguments that HMRC could raise in respect of whether a single trading entity exists, as opposed to two sole traders. I assume from your previous post that you and your clients have some strong arguments and a good basis for arguing that there are two sole traders, and I would suggest that you present those points to the new accountant.

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to jcace
13th Jan 2018 14:16

Yes the risks were made clear regards HMRC arguments at the outset, although confident under the arrangements in place that there are 2 self employed people and not just one tax vehicle.
I can as you say present these arguments to the accountant too, but it seems he is set on his position and not really listening. perhaps he is working for the tax man, not the client!

Sorry for the confusion - they wish to incorporate

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