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HMRC internal manual

VAT Single Entity and Disaggregation

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Tribunal: Useful legal decisions: husband and wife cases: Stephen and Angela Trippitt

The case of Stephen and Angela Trippitt (MAN/00/0249) VTD 17340 addressed the question of whether a husband and wife could operate two businesses from the same premises.

In this case, the Tribunal decided that

  • the traders had successfully separated the activities of public house and bed and breakfast into two separate entities
  • we were incorrect in issuing a Notice of Direction.

The facts showed the extent of the commercial relationship between the entities, in addition to which Mrs Trippitt gave 35% of her takings to her husband.

The Tribunal was satisfied that this amount constituted a realistic, commercial, arm’s length contribution towards the value of the shared premises and telephone and utilities.

This decision means that where one entity argues that it pays a fixed percentage of its takings to the other, you need to establish:

  • what would happen if there were no takings?
  • would a minimal amount still have to be paid?
  • if not, how does that entity see these arrangements as constituting a normal commercial relationship, given that it is at no financial risk?
  • is there a real monetary transaction (as opposed to just the appearance of one in the books)? Can they provide evidence of this?