VAT......

VAT......

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Have recently took on a client from a bigger firm. It is basically a window fitting business structured as a husband and wife partnership (50:50). They do private work and some work for a contractor under CIS. The turnover of the private work is approx. £40k and the gross income from work under CIS is approx. £36k. I assume they are registered for VAT as both of these amounts added together exceed the VAT registration threshold. They now want to incorporate and therefore I assume they can deregister for VAT given that the turnover less the CIS gross income is well below the threshold. The CIS work will continue to be carried on by the husband on a self assessment/sole trader basis. Any feedback and advise would be most appreciated.

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Universe
By SteveOH
08th Jul 2013 18:12

Vat threshold is currently £79,000

From the figures that you have given, they do not currently need to be registered as a partnership as the turnover is only £76,000. Also, they need to look at the previous 12 months turnover (on a rolling basis) to determine whether or not they exceed the £79,000 threshold.

If they incorporate, then there are two separate businesses and, again from the figures you have given, there would be no need to register.

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By a_m
08th Jul 2013 20:25

Approx Figures
Sorry SteveOH I used approx figures in the question. Their combined turnover last year was £90k.

Therefore, I assume that as long as the turnover of each of the separate businesses are below the vat threshold then neither needs to be registered for VAT.

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By spidersong
09th Jul 2013 09:57

If they split succesfully...

Why are they splitting the business? Will the husband be involved in the limited company? Will they be sharing any of the same resources, occupying the same premises, using the same staff?

If I was HMRC and I received the dereg application the first thing I'd be looking at was whether this was artificial separation of a business in order to deregister for VAT.

So they need to split very firmly and as completely as possible and they need good reasons for doing it that don't involve saving VAT.

But if they do split properly and survive any challenges from HMRC then a sole prop with a £36K turnver has no need to be registered and neither does a Ltd with a £40K turnover.

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