Q: My Husband and I are working in the same industry. He was self-employed but has more or less stopped trading. He got a job offer, and has settled up with almost all of his creditors. The only one remaining is the Revenue, for VAT, which he’s hoping to sort out soon.
I, however, have been made redundant. I’ll probably pick up a few clients if I decide to go self-employed, and am in the middle of researching my options. If I do set up on my own, will Revenue think there’s something fishy going on? And will I be on the hook for the VAT debt?
A: Unfortunately, instances of a business ‘folding’, only to carry on under the name of the previous owner’s spouse, are quite common these days and Revenue are understandably suspicious of this activity. For that reason, if you took on the same (or a similar) business name, bought the assets of your husband’s business, or employed him, I would expect some kind of investigation. Obviously, you’re entitled to work in the same industry and have your own business, but you should be careful to keep it at arm’s length from your husband’s.
I presume you’re also aware that the VAT debt isn’t something that can just be put on the long finger. The Revenue Commissioners can and do lodge judgements against people, especially those that aren’t engaging with the process. Businesses can negotiate a payment plan for VAT debt, and I’d highly recommend that your husband avail of this option. He should give the Revenue a call to get this process going.
If he’s effectively ignoring the VAT debt until he’s able to pay in full, there could be complications, especially if you’re jointly assessed. The Revenue can withhold refunds due to you that relate to your husband’s tax, and it may also be difficult to obtain a tax clearance certificate. Revenue could also insist on you paying a bond which can be held against future VAT liabilities as you are a connected party to husband.
So, while starting up a new venture in the same industry should be possible, there will be complications from this outstanding debt, and you’re better off if your husband addresses it head-on.
We advise many businesspeople in this position, and have experience of negotiating with the Revenue Commissioners, so don’t hesitate to contact us if you want to discuss your options.