Can I have 2 practices with only one VAT registered

Can I have 2 practices with only one VAT...

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I am a sole practitioner through a limited company that is voluntarily VAT registered (turnover about £35k).

I wish to extend my practice though another company, geographically 75 miles apart and don’t want to VAT register this company. The combined turnover of both companies/practices will be below the £79k threshold for VAT registration.

Providing I don’t funnel all the clients who can’t recover VAT through the non-VAT registered company, can anyone see any problems with this structure? Or even a third company providing we keep below the VAT threshold.?

As a follow on question, can anyone comment on why a practicing accountant should voluntarily register for VAT (except making a ‘profit’ with the flat rate scheme)?

Replies (15)

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chips_at_mattersey
By Les Howard
27th Feb 2014 17:08

Who's business is it?

If it is in reality one business, with multiple locations, then strictly you should retain each under one legal entity. However, if they are genuinely separate, then HMRC cannot challenge the existence of different limited companies. I read recently of 'geographical disaggregation,' where a single business operated multiple sites, but with single control; HMRC took the view that was properly a single business, and proceeded accordingly.

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By carnmores
27th Feb 2014 17:18

there was a post a little while back

that suggested that altho  HMRC cannot backdate a dissagggregation challenge they are challenging such arrangements under different provisions , i will try and search i thought it was Les who stated that must be wrong - but am interested in teh meaning of genuinely separate 

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By danielgricks
27th Feb 2014 17:31

Registered or Unregistered

They are 2 companies with one single control (me) because of ICAEW control rules

If the opinion is they are single business would that mean both have to have be either registered or unregistered?

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By the_fishmonger
28th Feb 2014 15:54

At the risk of incurring moderator wrath...

...OP. If you have insufficient knowledge of this relatively simple area of VAT legislation (despite it being readily available online and in clear enough english), should you really be offering 'accounting' services to any other taxpayer?

 

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By carnmores
28th Feb 2014 17:56

fishmonger

This is not as simple as you imply, a thoroughly unnecessary and useless answer

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blue sheep
By NH
04th Mar 2014 13:22

agree with fishmonger

sorry but both questions are simple, fundamental queries that anyone in practice should be able to answer.

The question over whether or not to register is one thing every single accountant should consider for every single one of their clients. If you can pass the VAT on to your customers, you should be registered, simples!

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Stepurhan
By stepurhan
04th Mar 2014 14:07

Not the question being asked

The question is not whether to register or not, though that has been touched on in responses. The question is whether a second distinct company has to be VAT registered when an existing company is already registered. This situation is not a simple part of the VAT legislation, nor is it as cut-and-dried as you are implying fishmonger and NH.

Two separate entities should, in theory, be treated as separate VATable entities, able to register and deregister independently. Whether they will be able to in this case is not quite that simple.

Incidentally "simple" not "simples". Simple is a perfectly adequate and well-used English word for the purpose intended. Simples on the other hand is an entirely made-up word which adds nothing to the language. It is also insulting as, with its origins of people being unable to tell the words "market" and "meerkat" apart, its use implies you consider the person addressed as hopelessly stupid.

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blue sheep
By NH
04th Mar 2014 14:19

this was what the poster asked

"As a follow on question, can anyone comment on why a practicing accountant should voluntarily register for VAT (except making a ‘profit’ with the flat rate scheme)?

This was the part of the question I was responding to was it not?

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By carnmores
04th Mar 2014 14:32

@stepurhan

you were doing so well until you said stupid.....

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By Ken Howard
04th Mar 2014 15:22

Go back to basics of disaggregation

You need to get back to basics.  Can they be operated completely separately, i.e. completely different customers, different suppliers, different equipment, different premises, etc.  Any "common" aspects need to be immaterial/trivial.  Can each happily operate without the other?  I.e. if one suddenly stopped or was sold, would the other carry on seamlessly?  If you can demonstrate the above, then it shouldn't really matter if it's just you who is the shareholder/director of both companies.

This is a very topical question as I'm going through the same thought process for my business.  My practice is schizophrenic at the moment as it is roughly 50:50 between online clients I never meet (mostly IT contractors) and local clients where I spend quite a lot of time doing management accounts etc.  I've had no end of sleepless nights when doing websites and marketing as it's hard to get a "message" to conflicting interests, i.e. one the one hand, my message is that online and no meetings is fine, on the other, I'm telling locals that they need hands-on expertise from a qualified accountant.  That's one hell of a mixed message on a website!  I'm also starting to think of an exit strategy and would expect a better and easier sale of two distinct businesses, possible one many years before the other to facilitate early semi retirement.  Part of the thought process has been VAT registration, likewise to the OP, total fee income doesn't breach VAT registration threshold, but ideally one "branch" would be better VAT registered.

I've already "ticked the boxes" to avoid VAT disaggregation boxes because I can honestly and practically service the online clients from home with a separate PC and printer, and use the office only for local clients using different equipment, etc.  I can get separate registrations from the ACCA, I'd be happy to buy a second licence for software etc, so there'd be very little reliance from one "business" to the other.

If the OP can create two demonstrably independent businesses that are "stand alone" in their own right, and have some logic of separation (i.e. client type, work type, location, etc), then I see no problem with what is being suggested, i.e. one registered for VAT, the other not.

 

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blue sheep
By NH
04th Mar 2014 16:14

the way I was taught

A very straightforward first test is - how does it look from the outside to the customer?  Does he view both as one entity because they have the same name, same phone number, same website etc.

If you are happy that they both look separate, then look at any common factors that still exist and ask whether they are material, and as Ken Howard said, can they be operated separately, and are they operated separately in practice?

You could not for example have a client walk through the door of business A, and then decide he would be better off with business B. 

It is not imo a complicated issue as has been suggested.

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By User deleted
04th Mar 2014 16:27

Everyone seems to be overlooking one obvious fact

The combined turnover will be below the registration threshold. In that case, HMRC will not apply disaggregation rules where one of the businesses has been registered voluntarily.

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By brumsub
05th Mar 2014 11:14

FRS

An additional point - If I remember rightly, and I think this is still the case, you can't use the FRS if your business is 'associated' or closely linked with another business within the last 2 years.

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By carnmores
05th Mar 2014 13:52

SIMPLES

eh!

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chips_at_mattersey
By Les Howard
06th Mar 2014 13:53

Flat Rate Scheme

brumsub is right; FRS rules include the prohibition on involvement in an associated business, and for obvious reasons. So, even if there is successful disaggregation of two or more businesses, the FRS rule will come into effect.

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