VAT - business splitting

VAT - business splitting

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Hi

Can anyone help me with the following

If there is 5 different Ltd Cos (all trading below but around the VAT threshold but controlled by the same shareholders) carrying out similar similar types of business activities in different fixed locations, would this be liable to a business splitting direction?  If so and a HMRC discovery is not retrospective does this mean that the previous (taxable) sales/turnover is not liable to VAT.

Also what potential penalties is the above example exposed too and how would this penalty be calculated if the discovery is not retrospective.

As always thanking you in advance

Replies (3)

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chips_at_mattersey
By Les Howard
28th Apr 2016 16:03

Disaggregation

HMRC have two main options:

1 - assume all the sales were made by the same taxable person historically; insist on retrospective registration, with penalties, and probably a large assessment; or

2 - issue a Notice of Direction to aggregate the multiple companies into a single taxable person. But this can only apply from a current date. There is no Potential Lost Revenue so, in my view, no penalty.

The scenario you describe is called geograpic disaggregation. See HMRC comment here: http://www.hmrc.gov.uk/manuals/vatdsagmanual/VATDSAG05100.htm

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Replying to Hugo Fair:
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By bumpdinkwhallop
28th Apr 2016 18:29

Clearly option 1 is a sore head

leshoward wrote:

HMRC have two main options:

1 - assume all the sales were made by the same taxable person historically; insist on retrospective registration, with penalties, and probably a large assessment; or

2 - issue a Notice of Direction to aggregate the multiple companies into a single taxable person. But this can only apply from a current date. There is no Potential Lost Revenue so, in my view, no penalty.

The scenario you describe is called geograpic disaggregation. See HMRC comment here: http://www.hmrc.gov.uk/manuals/vatdsagmanual/VATDSAG05100.htm

Thanks Les. Do you know what factors lead to HMRC trying to deal with it under your options 1 & 2 above?

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By bumpdinkwhallop
28th Apr 2016 18:17

No need to expand on my 2nd comment Les as your original link clearly answers when single entity and disaggregation apply and HMRC's approach.

Great reply & thank you very much

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