Is this legal or tax avoidance?

[Deleted User]

I just want to ask this question, it's not to say anyone has or will do this, but my mind asked me if it was allowed :-)

Husband and wife have a partnership that deals with trailers, the trailers provide a service and make money for the business.

Mr. Husband always drives tha trailers around and the company makes money.

Could Mr. Husband leave the partnership and leave Mrs. Wife to run the business, so she would now own her own trailer service business (sole trader).

Could Mr. Husband then open a transport business (again sole trader) and charge Mrs. Wife to move her trailers around.

Is this legal, or? Advice and information appreciated.

comeandgo

Tax avoidance is legal, tax evasion is not legal. I cant see anything wrong in that but why not have aLtd company with the two as directors and a partnership rather than two sole traders?

bengalknights

It's all very legal and there nothing wrong with what their doing

Annisele

If this is all entirely hypothetical, then in principle I don't see a problem.

If there are real people behind all of this, go see an accountant and make sure that what you're proposing is a) legal and b) actually achieves what you want.

Pennywise

Not clear what your motivation would be to do things that way.

If you're thinking about splitting the business so that each bit is under the VAT threshold to avoid VAT registration, then it won't work as HMRC would regard is as "artificial separation" unless the two businesses are completely separate i.e. no common customers, no common suppliers, administered separately, different equipment, etc.

paddyrg

If hmrc feel nervy when they look at the books it may come down to you to prove legitimacy. Get real advice from your own accountants and lawyers, but in principle it could work. How would you see it saving you tax though?

podperson

Hypothetically it looks legal but it may depend on the reason for doing it - eg if it's to avoid the VAT threshold then it will probably be pulled up by hmrc. If it's to try and lower tax and they have a partnership at the moment then I'm not sure on the benefit they think they would get out it?

[Deleted User]

Very true, wasn't about VAT as far as I know. Many Thanks.