Separate accounts for two separate businesses of sole trader?

H

Hebs

Registered User
Messages
36
Firstly, it's not as dodgy as it sounds!

After being unemployed for a year, my husband has set up a new tourism related business. I'm keeping the books for him.

He has also started picking up some handyman type work.

Do I need to keep two separate sets of books for the two business types?

He's a sole trader, with a registered business name for the toursim business. For the handyman work he just uses his own name.

Thanks in anticipation.
 
Not necessary, except for your own internal records. Both business relate to a trade or profession and income, expenses can be combined for the purposes of tax recording.
 
Oh good. That will make things simpler.

Thanks very much for your help
 
Expenses will have to be allocated to the different sources for the accounts extract of the form 11.

Once set of books will allow you to do this, if you can keep the expenses of the different trades seperate while recording
 
I'll have to give the descenting view.

Firstly, Form 11 asks for profits and/or losses for each trade. Each trade must be reported separately - not just expenses.

Secondly, certain things are ringfenced against that to which they relate, for example, losses incurred in one trade can only be carried forward for offset against future profits of the same trade.

It would also give Revenue greater comfort in an audit if the two trades were reported separately.
 
Two Trades

I agree


You will need to record income and expenditure seperatly.

You will also have to fill out 2 seperate trades on your Form 11.

These are two very different types of trades and the types of expenses will be very different.

Seperate books of accounts will need to be kept unfortunatley.

Regards
 
If he is running 2 different businesses and both are individually under the threshold for VAT registration then maybe its worth keeping 2 sets of books to keep the 2 seperate businesses under the VAT threshold. Or if one is above the threshold and one is below the threshold you can have a VAT number for 1 and not the other.

I was told this by an accountant before somebody says you can't do this.
 

It is the tax payer who becomes VAT registered, not the business.
 
Thanks for the updates. I decided on keeping to completely separate sets of books, as it is too hard to keep track of things otherwise.

It's my understanding that if a person is registered as a sole trader, it is that person that is registered (or not) for VAT... not the business.

If the businesses are limited companies, I guess separate VAT numbers would apply in that case.
 
Hebs said:
It's my understanding that if a person is registered as a sole trader, it is that person that is registered (or not) for VAT... not the business.
Click to expand...

That is correct but in the case of two entirely separate trades it may be possible to work around this particular issue, while remaining fully compliant with the law. You would need professional advice if proceeding in that direction as you would need to ensure beyond doubt that you would not be breaking VAT law and potentially building up hidden liabilities for yourselves.
 
IMHO sounds like a grey area, but i am not an accountant. Some expenses will be shared eg phone, possibly broadband, computer and accountancy bills etc. Supposing one business is 3 times the turnover of the other - would expenses be divided accordingly? Or split 50:50? And lots of self employed have a few "strings to their bow" ....and some trades are closely aligned. where do you draw the line. For example, if someone - say a handyman - does a bit of building work and a bit of gardening ...no need for seperate books there. Food for thought.
 

It's not really a grey area. There are plenty of businesses that share services which need to have the costs allocated accordingly. The most appropriate method of allocation is usually one which is based on how those services are consumed.

But the question here is whether or not separate accounts need to be maintained for 2 distinct and separately identifiable trades. Determining whether or not 2 or more distinct trades exist will be straightforward in most cases. The example cited by OP is obviously 2 separate, unconnected activities. The example given by you is clearly the one trade as they are similar types of activity.
 
The key point here is that it would be very good business practice to have two separate sets of management accounts. The owner should know how profitable each side of the business is. If it's all mixed up, he might not understand how his business makes its profits or losses.
 
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