Two separate trades and VAT

Two separate trades and VAT

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Morning all,

Recently taken on a new client who runs a training academy and, in the same building also has a function room with a bar.

The function room and bar are opened once he has finished his training during the day and the bar is available to people working in the surrounding offices.

What I need to ascertain is how to treat this for the purposes of VAT.

I know that the training academy is set to go over the VAT limit in the next 6 months so will have to register then.

Am I right in assuming that the bar can be kept as a separate trade under the same limited company and therefore not fall under the scope for VAT as the revenue from this is likely to be about £50,000 pa so this itself will fall under the threshold, obviously two sets of accounts will need to be prepared and things kept separate for the purposes of tax etc.

Any assistance on this will be greatly appreciated.

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By stephenkendrew
13th Jun 2014 11:33

No!

It's the legal person that has to be VAT registered not the business. In your case the limited company would be the VAT registered person and the VAT registration would, therefore apply to all of the company's trading.

The only way of keeping things separate would be to have two separate legal entities (two separate limited companies, a limited company and a sole trader etc).

This then takes you into the issue of artificial separation. If, however, the separation is done correctly (separate legal owner, separate bank accounts, separate records, any shared expenses appropriately split etc etc) then the worse HMRC can do is say there has been an artificial separation and the businesses should be combined as from a future date (i.e. cannot backdate anything).

 

 

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RLI
By lionofludesch
13th Jun 2014 12:28

Afraid I agree

Sound advice from Stephen.

You're into murky waters if you try the two limited company route.  It's a smart client who can keep the businesses separate and there aren't many around.

The question to ask - for any transaction - is "Would we be doing (or not doing) this if we didn't own both companies ?"

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