In G & C Belcher v HMRC [2017] UKFTT TC05891 the First-Tier Tribunal (FTT) agreed with the taxpayer that, even though they had submitted partnership returns under self-assessment, they were two separate business and so were not required to register for VAT.

  • Graham Belcher (GB) operated a barber shop, in the shop premises, on the ground floor of their home.
  • Several years later, his wife Christine Belcher (CB) opened a ladies’ salon in the converted garage of their home.
  • The shops had separate entrances and were in separate buildings.
  • CB took an accounting course and handled the books for both shops.
  • An accountant took on the preparation of the tax returns, accounts, and payroll.
  • The tax returns submitted were partnership returns which split the profits of both shops 50/50.
  • HMRC issued an assessment and penalties based on the partnership returns for late VAT registration and non-payment of VAT.

The FTT reviewed the prevailing case law on aggregation and in particular considered whether there existed the required financial, economic and organisation links for there to be one business for VAT.

  • No appointments could be made for the barber shop, it was walk-in only
  • The salon was by appointment only
  • Consumables were bought for both shops on the same account, but were different consumables for each shop
  • There was one joint bank account
  • The utilities used were the same, but were the same utilities as supplied to the whole premise, home, barbers, and salon
  • GB was responsible for hiring and firing staff for the barbers and CB for the salon
  • Different staff were used in each shop, though occasionally cover was provided to GB from CB’s staff
  • The records were extremely good and made it clear that expenses of the barber shop were met out of the takings of the barber shop and similarly for the salon
  • There was no cross-absorption of losses
  • Insurances and music licence had been arranged to cover both shops

It is easy from the above to see why HMRC may have concluded that they should be treated as one business, particularly because that is what the accounts and tax returns showed.

The FTT put far more weight on the following:

  • GB and CB confirmed that it was and never has been their intention to run as a partnership
  • If it came to selling their respective business, neither would consult the other before making a decision
  • The businesses were to the outside world, separate businesses carried on in an independent manner
  • The businesses had separate tills and separate ledgers
  • They were separately rated for business rates purposes

The FTT concluded that there was sufficient independence in the pursuit of an economic activity and on the balance of probabilities the fact they submitted potentially incorrect tax returns (including partnership returns) GB and CB were operating separate businesses for the purposes of VAT.

The businesses were sufficiently at arm’s length from each other and had sufficiently normal commercial relationships with each other to avoid aggregation for VAT registration.

It was noted as an aside that barristers practising independently will routinely share consumables and utilities.

The taxpayer’s appeal was allowed.


Registering for VAT

Business splitting and VAT (single business directions)

Case: G & C Belcher v HMRC [2017] UKFTT TC05891


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