Company "A" is VAT registered and pays VAT under the flat rate scheme for consultancy work. Currently all sales have VAT on them.
Company "B" has sales with no VAT on them as it is well below the threshold. Company "B" will be closing and company "A" will do the work instead. This work is not consultancy and is completely different to what company A currently does.
Q1. Does Company "A" have to charge VAT on this new income stream?
Q2. Can Company "A" have VAT on consultancy work and no VAT on the other work? If it can, how are the VAT returns completed? Will they have total sales of both income streams but VAT of only the consultancy work?
Thank you all.
Replies (10)
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No, you must charge vat on all sales. Providing you are making taxable supplies of course.
FRS - not allowed for associated businesses
Please be aware that if company A is associated with company B then neither of them can join the FRS unless one of them s closed.
Check out paragraphs 3.6, 3.8 and 3.9 of guidance 733.
It depends what your thinking actually is...
You need to look at Cheekychappy's first answer, the key there is 'taxable supplies'.
So yes a company can have lots of income streams some where it charges VAT and some where it doesn't. For instance Tesco sell clothing (standard rated VAT @ 20%), they sell food (zero rated VAT @0%), they sell firewood/charcoal (Reduced Rate VAT@ 5%), and they sell insurance (exempt from VAT) [ignoring the fact that the insurance is almost certainly from a seperate group company], so four different income streams with four different treatments, but....
What a company can't do is be registered for VAT and claim some of it's sales don't attract VAT because they're not registered for VAT. It's kind of a binary option you're either registered for VAT or you're not, there's no Schroedingers company that is both registered and not registered at the same time!
You also don't seem to understand what associated means, it's looking at whether the two companies are owned/controlled by the same people, not whether the businesses actually trade with each other.
As others have said from the questions you've asked and the answers you've given you would benefit from engaging and accountant and having a good long chat with them rather than relying on a free forum where no one knows what kind of businesses you're talking about etc.
Surely...
Once A takes over the income stream of B, it will all be caught by the FRS anyway, regardless of whether it is now making SR, ZR or Ex supplies?
Also depending on the level of income B brings in, might the nature (and so the percentage) of the flat rate trade change?
Or has my VAT knowledge slipped?
What?
What is being supplied ?
I'm inferring that both companies are making standard rated supplies but I'd like that confirmed.
Company B could be selling zero-rated nuts and Company A could be supplying standard rated cases for them for all I know.