Business A is a garage, repairing vehicles, carrying out MOT’s etc.
Business B sells vehicle parts on the internet.
Both are operated by a single sole trader. The combined turnovers are now close to VAT registration level. The trader regards them as being separate businesses with separate bank accounts and is reluctant to register for VAT as that will make both businesses less competitive.
Do you agree with me that HMRC will regard them as a single entity and VAT registration will be compulsory.
Replies (7)
Please login or register to join the discussion.
Irrelevant
If, as you say, he is a Sole Trader his and your opinion is irrelevant. The liability to register for VAT is placed upon a Taxable Person. The income of both his business, will count towards his taxable turnover until such time that one is incorprated.
If you incorporate, you can then consider if there is an arrangement whereby you can avoid VAT Disaggregation rules.
Agree that it doesn't matter whether they are one business or two. What matters is that they belong to the same person.
I believe as long as the entity is different ( ltd co / partnership) and different bank account, insurance and trade accounts and a trading name that is far away from the other business there is a strong case to argue they both can stay under the VAT limit.
.
I believe as long as the entity is different ( ltd co / partnership) and different bank account, insurance and trade accounts and a trading name that is far away from the other business there is a strong case to argue they both can stay under the VAT limit.
And use of assets, branding / marketing / advertising, employees, etc. It's a tricky situation to execute safely.
For the avoidance of doubt the sine qua non for businesses to be treated separately for VAT purposes is that ownership should be different.
Truly separate businesses?
Assuming you can sort out the ownership issue, which is currently fatal to your argument, are they really separate businesses? The two trades are very closely related to one another, and I would be surprised to find the parts sold over the internet had no relation to the repairs business. If the two businesses are intextricably linked then all the separate ownership in the world won't help you.
MoT tests VAT exenpt
Remember that in computing turnover for VAT registration obligation purposes MoT test turnover is excluded, this could make a big difference!