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bigduckontax
bigduckontax, Accountant
Category: Tax
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Was after a little advice regarding paying VAT please. My

Customer Question

Hi
Was after a little advice regarding paying VAT please.
My wife owns a beauty salon with 10 girls working for her and has a turnover which has recently gone past £250,000. She has been paying VAT on the flat rate scheme at 13% for the last five years up until a few months ago when her turnover went over the £230,000 threshold so now we have to account for all VAT at the full 20%.
About 6 months ago she stopped working in the salon herself and started with the first of a few network marketing companies. The first one she did was with a company called Lifetree World. They are a relatively new company that supply household shopping goods including most cupboard tinned and packet foods, cleaning products, toiletries and just about anything else you would buy with your usual shop excluding fresh and frozen goods. To qualify as a member with them we had to do a £165 shop each month with them. The network marketing side involved getting a team of people underneath us to do the same. We would get a small percentage commission on the orders they placed each month and then if the structure of our team hit certain order volumes then we could get a bonus. Over a period of 4 months we earned £22,000 from this company, but in the end had to cut ties with them because there was too many problems with deliveries and customer service was shocking.
What I wanted to know is with my wife being VAT registered with the Salon would she be liable for any VAT earned from this other venture?
Submitted: 1 month ago.
Category: Tax
Expert:  bigduckontax replied 1 month ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Yes she would as there is a connection between the two businesses, she being a Sole Trader.

Given that the two businesses are distinct in the type of services they offer, then it would be worth incorporating one or both. I would comment that if some customers deal with both businesses, then HMRC may take that as an indication of an artificial separation, and take action accordingly.

I am so sorry to have to rain on your wife's parade.

Customer: replied 1 month ago.
No problem, thanks a lot for the reply.
Be honest I thought that to be the case, just needed clarification.
I had put some money aside to cover the tax and NI for this extra venture so in paying the VAT now and taking that off the tax liability we have a bit of the money towards the VAT bill.
The earnings were made when we were paying the flat rate 13% VAT but will be declared now late, when we are paying 20% VAT. Do I declare at 13% or 20%?
Expert:  bigduckontax replied 1 month ago.

I am of the opinion that you should declare at 20%.

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