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VAT help/advice needed - Ltd company & sole trader

I run a VAT registered Ltd Co and would like advice about starting a new business as a sole trader

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I know business fragmentation and separation questions have been asked on here lots of times before but I'd appreciated any thoughts and advice on my specific situation if possible please. It's reasonably straightforward...

I'm a commercial photographer and operate as a director of my own ltd company. The vast majority of my work involves clients hiring me for marketing, advertising and branding photography within their businesses. My clients range from start-ups to FTSE 100 companies. I've been in business for 17 years and have been VAT registered for the last 10 years.

Last year I started selling prints of my personal photographs via a new/separate website. Despite it being a separate website and the fact that it involved selling physical goods (rather than my photography services) my accountant advised that it was sufficiently similar to my commercial photography and because it involved using the same cameras and lenses etc that it should be included as part of my ltd company business and I should therefore charge VAT on my prints.

I'm now starting a new business, picture framing, and I would ideally like to do this as a sole trader, keep it separate from my photography and not be VAT registered. The framing uses different resources to my photography, eg there is no overlap of equipment and is done in a different location. I can operate it independently with different bank accounts, book-keeping etc. So two questions:

1. Is it likely HMRC will see the framing as a sufficiently different business to my photography and agree I can run it as a non VAT registered sole trader?

2. If so can I as a sole trader charge my ltd company for framing services, eg when the limited company sells a framed print to a customer, or will this muddy the waters in terms of artificial separation?

As I say any thoughts or advice on this would be gratefully received.

Replies (13)

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By williams lester accountants
05th Feb 2021 13:44

I would advise to book an appointment with an accountant and get some (paid for) advice.

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By cohen
05th Feb 2021 13:47

Speak to your accountant

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By LukeS
05th Feb 2021 13:53

You have an accountant and he gave you advice.

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Replying to LukeS:
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By Ben Phillips
05th Feb 2021 14:04

My accountant gave me advice when it came to me selling my prints last year and I agreed with him and took it. However he is less certain this time round. In fact he said he really wasn't certain how I should structure the framing business, ie whether to keep it within the Ltd co or operate as a sole trader... Hence why I thought it would be interesting to see what the esteemed members of AccountingWeb thought.

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Replying to Ben Phillips:
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By Youareatit
05th Feb 2021 14:08

Quote:

My accountant gave me advice when it came to me selling my prints last year and I agreed with him and took it. However he is less certain this time round. In fact he said he really wasn't certain how I should structure the framing business, ie whether to keep it within the Ltd co or operate as a sole trader... Hence why I thought it would be interesting to see what the esteemed members of AccountingWeb thought.

Get another better qualified Accountant. Its not rocket science. Its not all about tax neither.

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Replying to Ben Phillips:
RLI
By lionofludesch
05th Feb 2021 14:36

Quote:

My accountant gave me advice when it came to me selling my prints last year and I agreed with him and took it. However he is less certain this time round. In fact he said he really wasn't certain how I should structure the framing business, ie whether to keep it within the Ltd co or operate as a sole trader... Hence why I thought it would be interesting to see what the esteemed members of AccountingWeb thought.

I thought you were going to be anonymous, Ben.

There's a good chance you can keep the framing separate, if you're careful and stick to the rules. No asset sharing, no property sharing, no giving in to temptation. It'll require some discipline, though. As suggested, if your accountant's undecided, seek another opinion.

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By Youareatit
05th Feb 2021 14:15

[quote=]

'' I'd appreciated any thoughts and advice on my specific situation if possible please.''

That is what an Accountant is for, specific tailored advice.

''I'm a commercial photographer- my work involves clients hiring me''

So these folk pay you then? But you think Accountants on here should provide their knowledge for free?

''As I say any thoughts or advice'' - this site tells you that it cannot provide advice, did you not read the rules?

Ignoring the fact that you have posted Anon against the site rules.

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By tom123
05th Feb 2021 14:10

To my mind, everything is connected to photography and art, so one trade.

Bear in mind that established businesses (ie with staff, premises etc) often have many related lines of activity broadly around the same sector.

You will find the admin effort to keep all the receipts separate, separate bank accounts, separate trade accounts etc, will outweigh the perceived benefits.

But then, as others say, get paid for advice.

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By Tax Dragon
05th Feb 2021 14:27

Ben Phillips wrote:

Can I as a sole trader charge my ltd company for framing services....

Would you do what you are planning if the answer to that is "no"?

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chips_at_mattersey
By Les Howard
05th Feb 2021 14:30

If the controlling person behind 'both businesses' is the same person, ie: you, then it is a single business.

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By Jason Croke
05th Feb 2021 15:39

Everything needs to be at arms length. Can the framing business survive on its own? HMRC use three tests, ALL of which must be met, HMRC must prove economic, financial and organisational links. Organisational links because you are Director of Ltd and also sole trader, economic and financial links refers to separate websites, separate bank accounts, where did the start up funds come from, is the framing business occupying premises rent free, that sort of thing.

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By northernmonkey
05th Feb 2021 15:54

It appears that you currently do offer some framing through your Limited Company (as otherwise, why the question about recharging) so my two pennerth is no, it's going to be very difficult to say they are sufficiently independent.

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By frankfx
05th Feb 2021 19:00

"However he is less certain this time round.
In fact he said he really wasn't certain how I should structure the framing business, ie whether to keep it within the Ltd co or operate as a sole trader... "

I am certain that your existing accountant was not given the opportunity to provide Formal Advice to a formal question.

What an assertion on my part.

Occasionally when I have proffered a view to a client , followed by

" let me do some research to identify the options"

The response is "leave it for now"

Shorthand for
' I am keeping my wallet shut"

Many Awebers have their brain cells whirring on overdrive, as many client questions have a myriad ( not miasma) of dots to join and Ducks to arrange in a neat row.

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