two businesses - should they be VAT registered

two businesses - should they be VAT registered

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Hello - A potential client is registered as a self employed landscape gardener & is not VAT registered as his turnover has been below the threshold. In the last tax year he has started a second business, a partnership with his wife, for which they have submitted an SA400 to HMRC. I am concerned they should be registered for VAT as the Partnership trade is the supply of garden materials (fencing panels, wooden planters etc) most of the sales are to his self employment landscape gardening customers. Some of the partnership sales are to other customers; the client & his wife ultimately want this to be the only business so he can retire from the manual gardening work. In the last tax year the total income for the two businesses is slightly higher than the VAT threshold, approx £60k for the self employed business & £20k for the partnership. I think HMRC would class the two income sources as one trade - possibly viewing the creation of the partnership as a method of avoiding VAT registration but the client insists his previous adviser assured him this would not be the case. Any views would be appreciated.

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By User deleted
22nd May 2014 16:04

I wouldn't be too concerned - yet

You say that the second business has been "started". So there can be no charge of splitting an existing business. The second business is certainly close enough in nature to be considered in the context of disaggregation rules. But provided all other steps have been taken to separate the two (separate books, bank accounts etc etc) you can probably forget retrospective action.

Instead, if HMRC are successful, any direction to treat the businesses as one should have effect from the date of their notice. So if I were in your shoes I probably would not be rushing to register them, They're obviously already aware of the potential for HMRC challenge - I'd leave it at that. Caveat - you know the precise circumstances far better than I do.

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