Mixed Businesses LTD Co, Yachts and HMRC.

**pastalista** · 28 January 2011, 17:05

Originally posted by prozak View Post

When I originally started my Ltd Co. it was to be used for some business ideas I had in the yachting industry.

Due to lack of capital, time and the economy I’ve never progressed those ideas and now use the company for IT consulting.

I now am getting to the point where I can perhaps pursue the yachting side of my plans as long as I also keep some steady consulting income going....

If I now purchase a yacht with my company for use in a business what will HMRC look for to ensure I am not just trying to make VAT and other considerable tax savings? And lets face it yachts are a money sink so the savings should be quite substantial.

Can I offset a yacht business loss against my consulting business profit? As I can’t imagine I would make a profit in the first 2 years on the yachting side....

Will HMRC just consider the yacht a hobby and act accordingly?

Thanks.

When I ran a second business out of my limited company that was used for consulting, I and my accountant had 7 meetings (3 face to face and 4 on telecon) with the Revenue and with Customs (they were separate then) about the matter. My second business involved the music industry. After these 7 meetings they finally agreed that it "was a real business, not a hobby" and gave me a letter saying so.

The music business has many similarities to yachting in that it is a money pit. I sank £125,000 into the business over a 3 year period and ended up with no return meaning, of course, a heavy loss that could be used to offset my consulting income and lots of VAT reclaims for kit and studio hire and so on.

All looked well for a while until HMRC (now joined at the hip) decided that, despite the letter and "upon revue" that it wasn't actually a business, it was a hobby. And then they asked for huge sums of money.

My lawyer said that we would win in a fight but it was a case of "how much do you want to spend fighting it"? My lawyer said I could figure on "tens of thousands of pounds" with no guarantee that even if I won, my costs would be met. Ain't justice grand?

All I would say is be very, very careful that you can prove beyond doubt that it is a business and that you personally derive no benefit (the business can make money of course, I mean that you don't go off on the yacht for a 2 month cruise - or even a quick trip around the bay come to that) from it.

Luck

Pastalista

**prozak** · 28 January 2011, 17:16

Originally posted by pastalista View Post

All I would say is be very, very careful that you can prove beyond doubt that it is a business and that you personally derive no benefit (the business can make money of course, I mean that you don't go off on the yacht for a 2 month cruise - or even a quick trip around the bay come to that) from it.

Yes this is my concern.

There would be no benefit to me.

I would not use the yacht for anything other than the business.

My concern is that if I am not getting sales then HMRC will be even harsher - assuming that I am indeed using it for personal pleasure and the business is just a front...

Your music example concerns me.........
did you have a product to sell?
Did you have websites and marketing material?
Did you go to music shows? (i would attend boat shows if budget allows)
Assume you had a business plan.....

**TykeMerc** · 28 January 2011, 17:58

The slightly ridiculous aspect of this is that if it was a separate Ltd then they probably wouldn't even have raised an eyebrow at Pastalista.

Could it be argued that there are 2 companies, 2 sets of books etc, but company A (consultancy) is investing heavily in company B (yachting) as a subsidiary? Maybe even a Group?

I must admit this is pure speculation as I don't have experience of this unrelated business situation, where I've had multiple business lines they've always been complimentary so no issues.

**pastalista** · 28 January 2011, 18:04

Originally posted by prozak View Post

Yes this is my concern.

There would be no benefit to me.

I would not use the yacht for anything other than the business.

My concern is that if I am not getting sales then HMRC will be even harsher - assuming that I am indeed using it for personal pleasure and the business is just a front...

Your music example concerns me.........
did you have a product to sell?
Did you have websites and marketing material?
Did you go to music shows? (i would attend boat shows if budget allows)
Assume you had a business plan.....

Yes
Yes
Yes
Yes

I had all sorts of things - CDs (thousands), promotional material, studio bills, producer bills, equipment bills, newspaper reviews of the product and all manner of other proof.

I'm not trying to toll the bell of doom but again, be very, very careful. I would certainly be looking for something in writing from them in advance, even though in the event it didn't do me much good. If I did it again I would have a lawyer witness their letter of approval and be in the same room when it happened.

I would also spend every last penny I had to fight them if they pulled the same stunt again.

I hope you get your yacht.

Pastalista

Mixed Businesses LTD Co, Yachts and HMRC.