Reply to: Numpty question time.....

[BlasterBates]

If your photography makes a loss HMRC may (probably I would say) view this as a hobby, i.e they won't let you offset your losses for your "hobby" from your IT business. That's one reason for separating them. If you keep a set of different accounts you would be then in a position to offset losses from your photography business in later years should it take off. You may also get a lot of hassle from HMRC questioning your photography business. Lets say you made continuous losses over several years and HMRC came around and did an audit; you would want to be sure that you could demonstrate it really was a business.

Personally I would separate them, and consider combining them if the photography makes a profit, in which case it would be no problem.

[pmeswani]

If you retain a limited company do not assume that by trading as a sole trader you will be able to avoid regsitering that business for VAT, our friends at the VAT office will look at all your business activities and probably treat them as one, even if they are separate legal entities etc.

Ensure you take advice before committing to something new.

Alan

To be honest Alan,

Because I have already got a Ltd Company, it doesn't make sense for me to go down the route of Sole Trader. It may make sense to go down the route of Self Employed to avoid charging VAT and declare the income on my Self Assessment, but I want to bring a new revenue into the business, so would probably work out best if I used the Ltd route.

[Nixon Williams]

Thanks for the information. Regarding charging VAT to the public, I will need to offer a special "20%" discount for those type of shoots. My main focus will be on Professional Models, etc. The whole idea may backfire and may need to do this via the non-Ltd route, but until I give it a go, I won't know if it will be successful.

If you retain a limited company do not assume that by trading as a sole trader you will be able to avoid regsitering that business for VAT, our friends at the VAT office will look at all your business activities and probably treat them as one, even if they are separate legal entities etc.

Ensure you take advice before committing to something new.

Alan

[pmeswani]

As from 1st March, there will be a ceiling amount of £25,000 when using the ESC C16 route. However, if using a formal voluntary liquidation, there will not be any restrictions.

Another point to consider is the VAT angle. If you are charging members of the public for your photography, you have to charge them VAT that they cannot recover. This could make you less competitive on your pricing.

Thanks for the information. Regarding charging VAT to the public, I will need to offer a special "20%" discount for those type of shoots. My main focus will be on Professional Models, etc. The whole idea may backfire and may need to do this via the non-Ltd route, but until I give it a go, I won't know if it will be successful.

[SallyPlanIT]

I thought that option was disappearing soon, Or am I thinking of something else?

As from 1st March, there will be a ceiling amount of £25,000 when using the ESC C16 route. However, if using a formal voluntary liquidation, there will not be any restrictions.

Another point to consider is the VAT angle. If you are charging members of the public for your photography, you have to charge them VAT that they cannot recover. This could make you less competitive on your pricing.

[pmeswani]

If you are looking to photograph long term i.e. give up consultancy work, wouldn't it make sense to have 2 separate entities? that way giving you the freedom to close the consultancy business. You would then be able to access the remaining capital via capital gains taxes and utilising the tax free annual allowance.
If you put the photography work through the business you would never have the opportunity to close it.

Just a thought.

I thought that option was disappearing soon, Or am I thinking of something else?

I hear what you are saying about having separate entities, however, I don't want or need the hassle, and I don't have enough of a warchest to take see any tax free allowance. I just want to keep it as simple as possible without wondering what belongs to what company, keep the Accounting fees down, etc. (I'm not a numbers person sadly). Also, if I were to go VAT registered in my Photography Ltd Co, doesn't the threshold get adjusted accordingly? If both my Photography and IT Consultancy work go belly up, I will most likely fold the company at that point.

[Danielsjdaccountancy]

If you are looking to photograph long term i.e. give up consultancy work, wouldn't it make sense to have 2 separate entities? that way giving you the freedom to close the consultancy business. You would then be able to access the remaining capital via capital gains taxes and utilising the tax free annual allowance.
If you put the photography work through the business you would never have the opportunity to close it.

Just a thought.

[pmeswani]

Will the accountant be charging more for their service?

Apart from the insurance saving of £125 a year, I'm not convinced that there are any upsides and there are more downsides that I can see. To make any significant amount of money from photography, you've got to be very good. There are plenty of fauxtographers out there - try not to appear here.

I was hoping the Accountant would say if there was an increase in cost. In terms of being "Very good" as a photographer, in the short term, I am on a learning curve. I am working on the hope that some of my work will get recognised and that I will bring in a modest income.

I don't plan to be a fauxtographer, just a semi-pro photographer. I don't do a huge amount of Photoshop work on the photography that I do, unless it is to clone out any obvious distractions that can be easily cloned out.

[pmeswani]

There is no legal or accounting reason why you cannot combine both business activities through the one limited company.

Certainly the accounting may be easier if they are separate but that is the only consideration.

Alan

That's a fair point, which I hadn't really considered properly. I don't expect my photography work to take off in the short term, but I am at some point hoping it will take over my day job and become my full time career.

[TheFaQQer]

The main reason why I want to integrate my Photography work into my IT Ltd Business is to reduce the amount of paperwork, Accounting Fees, hassle of opening a new Business Bank Account and Insurance costs. (My Insurance provider is charging me 76 pounds extra on my premiums, where as if I went down a different insurance company, it would cost me nearer to 200 pounds to get insurance. To me that's a significant saving). I also want to bring in a different income stream into the business as well, and I hope that putting the work through the business will add some form of credance / reputation to my work as well as getting the right level of insurance cover I need. If there is an Accounting reason why I can't do it, then I will go down the route of starting up a new Company for the photography work and pay the Accountant to do my annual returns when needed. If there is a legal reason why I can't do it, then I am happy to hear it.

Unless the Law has changed over the past 10 years, I know one of my previous employers integrated a Legal Business into an IT Services Business. I am using that basis as a reason for asking the question to my Accountant about what I need to do to add the Photography side of my work into the Business.

Will the accountant be charging more for their service?

Apart from the insurance saving of £125 a year, I'm not convinced that there are any upsides and there are more downsides that I can see. To make any significant amount of money from photography, you've got to be very good. There are plenty of fauxtographers out there - try not to appear here.

[pmeswani]

Thanks for the response everyone. So in effect, all I need to do is to get the Insurance premiums paid and inform my Accountant of the additional use of the business, and if the VAT threshold is met or if the Photography work exceeds the IT work in terms of income, I would need to tell HMRC accordingly.

I have been less than impressed with my Accountant of late, and I will need to find an Accountant who understands Contractors and is prepared to handhold me to the point at which I need to get things done. But that's something I will need to sort out at a later stage.

Again, thanks for the responses, much appreciated.

[Nixon Williams]

If there is an Accounting reason why I can't do it, then I will go down the route of starting up a new Company for the photography work and pay the Accountant to do my annual returns when needed. If there is a legal reason why I can't do it, then I am happy to hear it.

There is no legal or accounting reason why you cannot combine both business activities through the one limited company.

Certainly the accounting may be easier if they are separate but that is the only consideration.

Alan

[pmeswani]

Not convinced that answers the question - how does integrating a photography business into your IT business help answer questions. Looks like it creates more than it answers

The main reason why I want to integrate my Photography work into my IT Ltd Business is to reduce the amount of paperwork, Accounting Fees, hassle of opening a new Business Bank Account and Insurance costs. (My Insurance provider is charging me 76 pounds extra on my premiums, where as if I went down a different insurance company, it would cost me nearer to 200 pounds to get insurance. To me that's a significant saving). I also want to bring in a different income stream into the business as well, and I hope that putting the work through the business will add some form of credance / reputation to my work as well as getting the right level of insurance cover I need. If there is an Accounting reason why I can't do it, then I will go down the route of starting up a new Company for the photography work and pay the Accountant to do my annual returns when needed. If there is a legal reason why I can't do it, then I am happy to hear it.

Unless the Law has changed over the past 10 years, I know one of my previous employers integrated a Legal Business into an IT Services Business. I am using that basis as a reason for asking the question to my Accountant about what I need to do to add the Photography side of my work into the Business.

[Nixon Williams]

So, do I need to worry about the VAT FRS Scheme that I am? I don't plan on going above the VAT FRS threshold in the current financial year.

You would only need to withdraw from the Flat Rate VAT scheme if your gross turnover exceeded £230,000 in the year.

Whether you need to change your FRS percentage would depend on the proportion each business contributes to the overall turnover.

When the 'new' business contributes a larger part of the overall business, then you may need to change.

If and when you do change I would suggest disclosing this to HMRC when you apply to change the rate, then if they try to challenge it in the future you have provided full disclosure of the facts.

Alan

PS - The code at Companies House is only for statistics, it does not give any validity to any new business that you undertake, so simply adding a new SIC code when you do the next Annual Return will be sufficient.

[Jeremiah@RHJAccountants]

If you have different business sectors under FRS you must choose the business sector that best describes your main activity and apply that FRS percentage to your total turnover.

See the link form HMRC website

HM Revenue & Customs: Flat Rate Scheme for VAT

Hope that helps