I'm wondering what the implications are about implementing a side business under my current business umbrella.
What I mean is:
I have a new business that is being set up operating garage. I also intend to do invoicing for a DJ company so that the guy doing the DJing doesn't have to worry about doing any self employed declarations.
So if we invoice the bar 15k a year including VAT, but then pay the guy doing the DJing 15k and deal with his PAYE contributions, does that affect my garage tax?
You have charged the bar £12,500 plus £2500 VAT which you owe to HMRC.
You then have £12,500 to pay to the DJ inclusive of employers NI, employee's NI, PAYE plus you will soon have compulsory pension to contend with.
Not got time to do the sums at the moment but in short if you pay the DJ £15k you will be compensating them several thousand from the garage business.
You have effectively tied the two businesses as one by the garage invoicing and compensating the DJing. Also, the DJ business does not fulfil in itself the criteria of a business as there is no profit motive when more than it takes is being paid in salary.
It is not a cost effective idea unless your DJ is working at closer to £6k than £15k so basically I would knock it on the head and tell the DJ that they would be better off spending a couple of hundred a year getting a professional to sort out their self assessment (Otherwise it will just drag down your garage business).
The alternative here is that you are attempting to reduce tax liability on the garage by compensating the other business but, as mentioned previously, as it is not really a business due to lack of profit motive HMRC may (is very likely to) not allow such as legitimate expenditure of the gagrage.
Lets take the alternate view that the DJ is an employee of the garage paid £15k and part of their duties is a DJing bus business. Whilst making absolutely no commercial sense as you are paying more than you are receiving, by putting it in that way the salary is a legitimate expense of the garage busienss.
The whole scenario will have a detrimental effect on your bottom line no matter how you play it.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'm wondering what the implications are about implementing a side business under my current business umbrella.
What I mean is:
I have a new business that is being set up operating garage. I also intend to do invoicing for a DJ company so that the guy doing the DJing doesn't have to worry about doing any self employed declarations.
So if we invoice the bar 15k a year including VAT, but then pay the guy doing the DJing 15k and deal with his PAYE contributions, does that affect my garage tax?
Thanks
Ben
What I am reading is that Ben is running a garage. He is also manager for a DJ but earns nothing from it. The first question HMRC would ask is "why?"
If you pay the guy £15k via PAYE you will suffer employers NIC.. which would be totally unnecessary, if this guy did his own accounts... If you pay him as a "subcontractor" you may be breaching IR35 rules..
As a sole trader, you run the risk of becoming a VAT registered person. This "guy's" £15k income to your business, will push you into VAT registration a lot quicker than necessary, which means as a garage - selling to non vat registered public - you will be less competitive, as your prices will be 20% higher than a non VAT registered garage
my soon still comes in banking terms. Six months away is imminent, two years away is soon, five years away is impending.
This is not something that I've really looked at yet but its certainly on the horizon and its a phased implementation with some people being taken in earlier than others.
Ignoring it is really hiding ones head in the sand.
The feeling that I'm getting is that it won't be the success that the Government think as the queries that I've had relate to moving staff off payroll, reducing salaries or just getting rid of them altogether.
The Government assume that business has bottomless pockets to compensate poor decisions made in relation to immigration levels by the last administration but the reality is that even though I have only had a couple of queries my feeling is that this policy could very possibly result in (a) massive unemployment and (b) hundreds of thousands of new small limited companies as people are forced down the IR35 route.
That will then of course see changes to the IR35 legislation closing any pension loophole and resulting in option (a) only.
I do not know what planet the Government live on but on this one small business is still struggling and devoted as they are to their staff out of necessity I can forsee business shedding large numbers of staff as a result of the new pension legislation.
On the flip side I have had six calls from representitives of new pension agents call me this week wanting to take me out to introduce themselves. Obviously with a view to introducing them to my clients.
So, maybe its a time to concentrate on picking up a few of the new pension agents as clients? (every cloud having a silver lining and all that).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
