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Horsing around

17 October 2007
Issue: 4130 / Categories: Forum & Feedback , HMRC powers
My husband and wife clients have recently ceased full-time employment and have purchased, in their joint names, a farm comprising farmhouse, outbuildings and fields. No arable or livestock farming takes place and they plan three main activities of converting the outbuildings for use as holiday lets; providing livery for horses; and renting plots of land to private individuals for the storage/parking of caravans and other such vehicles.

Two other factors are that the clients have borrowed £400 000 of the £750 000 purchase price and that the husband does have another secondary source of income (about £400 a month) from a limited company of which he is director and shareholder and which is unconnected with this new business.
How should the new business be structured? Should it be one or should I suggest splitting it into say a partnership (e.g. for the lets) and two sole trades (say him doing the storage and her doing the livery)? Simplistically I wonder if there are VAT savings that could consequently be made or would HMRC attack such a structure?
Query T17 095 — Tonto.

Reply by Venta Belgarum:

All the proposed business ventures although property based involve an element of potential income variability and management input. And as both...

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